Cyprus, known for its crypto-friendly environment, is set to tighten its regulatory framework for the industry. According to a report from Cyprus Mail on October 10, the Ministry of Finance plans to amend the existing Prevention and Suppression of Money Laundering and Terrorist Financing Law to bring it in line with global standards.

The proposed amendments have been presented to the House of Representatives Standing Committee on Legal Affairs, Justice, and Public Order. The changes aim to align Cyprus with international Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) standards set by the Financial Action Task Force (FATF), as well as the recommendations outlined in the MONEYVAL report published in November 2022.

As part of these amendments, all crypto service providers will be required to register with the Cyprus Securities and Exchange Commission (CySEC). Failure to comply could result in penalties ranging from fines of up to €350,000 ($370,000) to imprisonment of up to five years, or both.

The proposed changes have sparked some concerns from the Cyprus Bar Association, particularly regarding the requirement for crypto service providers holding licenses from other European countries to also register with CySEC. This provision was reportedly added by CySEC itself.

While the Ministry of Finance has yet to respond to inquiries from Cointelegraph, Cyprus has generally been a welcoming jurisdiction for crypto businesses. In recent months, crypto companies such as eToro, which received its crypto asset service provider registration from CySEC in September, and Bybit, which obtained its license in June, have successfully registered in the country.

However, the world’s largest crypto exchange, Binance, which has faced increasing regulatory scrutiny globally, decided to deregister from Cyprus in July, citing a shift in focus towards larger EU markets.