No regulation, no blockchain

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Entrepreneurs in the booming high-tech and fintech industry are unhappy that the government withdrew a bill designed to regulate blockchain technologies and crypto assets.

As they argue, pulling the plug on the legislation will endanger the future of the island’s technology industry.

The Finance Ministry withdrew a bill to regulate the use of blockchain technologies and crypto assets.

Local stakeholders argued the decision was more proof that authorities are not crypto-friendly.

Although big cryptocurrency trading platforms cast their vote for Cyprus, stakeholders feel the latest decision will damage the island’s ambition of becoming a high-tech hub.

Cyprus has attracted the likes of Binance, the world’s largest cryptocurrency trading platform, to establish a presence.

However, entrepreneurs have been vocal about the government’s stance towards blockchain technologies and cryptocurrencies.

The bill had been lingering in parliament for over two years, with the ministry withdrawing it ahead of a directive expected to be introduced by the European Parliament on Crypto assets.

The Finance Ministry also sent the bill to the legal services, who highlighted some provisions found to be unconstitutional.

The European Parliament is preparing the regulation on markets in crypto assets (MiCA).

It established harmonised rules for crypto-assets at the EU level, thereby providing legal certainty for crypto-assets not covered by existing EU legislation.

The Markets in Crypto-Assets Regulation (MiCA) should be implemented into national law by the EU member states about 12 to 18 months after the regulation is introduced.

Unregulated

However, local stakeholders argue that leaving blockchain unregulated for such a long period will only harm the island’s goal of becoming a tech hub, as other jurisdictions have such regulations.

Furthermore, the Cyprus Bar Association has argued that the bill covers a different scope than the MiCA regulation, pointing out it could achieve comprehensive regulation for various issues related to blockchain technologies and crypto assets.

In comments to the Financial Mirror, a leading figure in the high-tech industry said that Cyprus needs to take the matter more seriously if it wants to attract businesses and blockchain technologies.

“Leaving blockchain unregulated will deter big tech companies from choosing the island as a business base,” argued the entrepreneur.

“The Ministry of Finance does not seem to take into account the important purposes the bill could serve, such as the promotion and development of blockchain technologies and other fintech.

“Regulations on blockchain would facilitate high tech, especially fintech companies, as they would provide stability, predictability, and legal assurance.

“The lack of regulations could lead to legal issues with smart contracts, ownership of crypto assets, and other matters.”

The entrepreneur, who didn’t want to be named, said he expected the Finance Ministry to produce a clear explanation as to what the issue was with its proposed legislation.

In recent comments to the Financial Mirror, the University of Nicosia CEO and Digital Currency professor Antonis Polemitis said that Cyprus authorities need to develop a regulatory framework for companies active with cryptocurrencies as soon as possible.

Polemitis said the lack of regulations on blockchain and crypto assets made life hard for businesses relocating to Cyprus and entrepreneurs stepping into the crypto world.

He said the lack of regulation feeds into Cypriot banks’ not allowing companies or individuals dealing with crypto to open digital currency accounts.

“It is next to impossible to encourage crypto businesses to come to Cyprus, as the local banks actively block any crypto-related transactions.

“These companies can’t even open an account here,” said Polemitis.

He argued that companies that do decide to move to Cyprus relocate their office here but set up offshore bank accounts.

Meanwhile, the Cyprus Securities and Exchange the Cyprus Securities and Exchange Commission (CySEC) is taking part in a joint campaign by the European Supervisory Authorities warning consumers of the dangers associated with crypto assets.

George Theocharides, head of CySEC, has said that “large crypto asset companies know very well that only through regulation will they be able to survive.”

CySEC recently launched a tender for Crypto-Asset Markets Data and Blockchain Analysis Platform Services as applications by Crypto-assets service providers rise.

According to the tender documents, the €120,000 two-year contract grants CySEC access to real-time data provided by blockchain data platforms that will assist the Commission in understanding crypto-asset risks.