In June 2019, the Council of Ministers of Cyprus, approved the National Strategy for Decentralized Technologies-Blockchain. The strategy came as a result of the efforts made within the framework of the European Cooperation in Blockchain, which was entered into on 4 June 2018 between Cyprus, Greece, Malta, Italy, France, Spain and Portugal, subject to the relevant Declaration of the Southern Mediterranean Countries on Distributed Ledger Technologies (DLT) of 4 December 2018.
This initiative encouraged the use of these technologies in both the public and private sectors (particularly relevant for the financial services sector, where banking and investment transactions will be transformed in the coming years). One of the most interesting points in this strategy was that the Ministry of Finance, in cooperation with the Tax Department and the Registrar of Companies, would coordinate the drafting of a regulatory framework based on certain principles set out in the strategy, to be implemented in Cyprus.
Based on the provisions of the above, with the support of an international expert and under the coordination of the Ministry of Finance, a proposed bill entitled “The Distributed Ledger Technology Law of 2021” was prepared. It is now under public consultation.
The bill includes the following:
• Definitions for DLT and crypto assets.
• Legal certainty regarding smart contracts and cryptocurrencies as an asset.
• Authorizing provision to CySEC for the issuance of secondary legislation, within the framework of its responsibilities for the supervision of cryptocurrency service providers.
According to the authorities, the bill aims to facilitate the application of DLT, including blockchain technology, in a technologically neutral way. It seeks to strike a balance between the need for promotion and proper use of new technologies, on the one hand and the need to avoid money laundering and to safeguard consumer rights, on the other.
Αccording to the Ministry, the bill aims to provide legal certainty for the purpose of promoting the proper use of smart contracts in Cyprus. Moreover, additional important matters are included in this legislative initiative such as the proof of, and the transfer of, ownership of digital coins and the issue of digital signatures. Our experienced Financial Services team can help you navigate the applicable regulatory framework in Cyprus. For any enquiry or assistance please contact Dimitris Papoutsis, Ioannis Sidiropoulos or your usual contact at Elias Neocleous & Co LLC.