As Cyprus continues to strengthen its position as a financial hub, the cryptocurrency market presents an unavoidable new frontier for regulated brokers offering traditional financial products and services. With the global crypto market now valued at $4 trillion and bitcoin ranking among the top 10 global assets by market capitalization, Cyprus-based companies are in a unique position to capture this growth based on existing European regulatory frameworks, including the Markets in Crypto Assets (MiCA) Regulation, and their strategic location.
For brokers regulated in Cyprus, MiCA’s regulatory clarity and a more mature market create both stability and growth potential. This results in new revenue streams from trading spreads, transaction fees and cross-selling products. At the same time, stablecoins have become essential financial infrastructure – processing $38 trillion across $1.3 billion transfers last year – and they enable more efficient instant settlement, better liquidity management and 24/7 execution that traditional banking systems can hardly match.
In a recent webinar, we explored how Cyprus and other EU-based brokers can take advantage of this opportunity while navigating the emerging EU regulatory landscape.
The MiCA Framework: Creating Clarity
The European Crypto-Asset Markets Regulation (MiCA) establishes a comprehensive framework for crypto-asset service providers (CASPs) and token issuers, including stablecoin issuers, creating a level playing field across the Union. The MiCA is directly applicable, but its application is ensured by national “competent authorities”; In Cyprus, the Cyprus Securities and Exchange Commission (CySEC) has been designated as the national MiCA authority. MiCA defines ten services that closely mirror traditional investment and payment services – such as crypto custody, order reception and transmission, investment advisory and portfolio management – thereby aligning crypto activity with familiar regulatory concepts. Under Title V, MiCA sets out general obligations for all PSAPs as well as additional risk-based obligations tailored to specific services.
The advantage of existing licenses
While there are opportunities for brokers to partner with MiCA-regulated entities to offer crypto-asset services to their clients without their own MiCA license, this generally means giving up client relationships for crypto-asset services (e.g. introducing clients to PSAPs) and still a (substantial) revenue split.
For brokers already regulated by MiFID, MiCA provides a simplified route to offering crypto-asset services via its Article 60. Rather than undergoing a full authorization process with their local regulator, existing regulated firms can extend their services to crypto-assets via a simplified notification process. The MiCA and the EBA’s additional guidance have clearly defined the information that must be submitted as part of this notification, focusing on the documentation of operational risk controls and compliance frameworks. Submission is required 40 days before the launch of the crypto services, and the crypto services can then be offered throughout the European Economic Area.
This notification route is, however, only available for services already offered on traditional markets: a broker regulated for portfolio management can notify crypto portfolio management but not for new categories of services, such as crypto custody or order transmission.
How Chainalysis can help you
Chainalysis offers a comprehensive suite of risk management and compliance tools designed specifically for regulated entities entering the crypto space:
- Transaction monitoring system tracks fund flows to and from your platform
- Entity Risk/Wallet Screener assesses risk during customer onboarding
- Enhanced Due Diligence Tools Enable More Thorough Investigation for SAR Filings
Why is it time to act
The move now allows CySEC-regulated brokers to capture deposits, define customer behavior, and create a depth of liquidity that is difficult to dislodge. Establishing a compliant crypto footprint is the most effective way today to alleviate the growing competitive pressure from crypto exchanges – and other financial players – who are moving towards tokenized securities, thereby transforming a potential risk into a measurable growth channel based on strict controls and trust from supervisory authorities.
Looking to the future
As Cyprus strengthens its role as a Mediterranean financial hub, its regulated brokers see a clear opportunity for growth in crypto services under the harmonized MiCA regime. For MiFID-authorized firms, the MiCA Article 60 notification pathway may enable equivalent crypto-asset services without a complete new authorization process.
The combination of EU-wide regulatory clarity, CySEC’s supervisory commitment and growing client demand means that now is the right time for Cypriot brokers to focus not on whether to get into crypto, but on how quickly and efficiently to create a compliant offering.
Request a demo to see how our solutions can support you on your digital asset journey.
