The Cyprus
Securities and Exchange Commission (CySEC) has announced the adoption of new
European Banking Authority (EBA) guidelines that will impact FX/CFD brokers
operating as Cyprus Investment Firms (CIFs). According to the latest circular
from the market watchdog, they will take effect at the beginning of 2025.
Cyprus Regulator
Introduces New Capital Test Rules for Investment Firms
The
guidelines, set to take effect next year, clarify the application of the group
capital test for investment firm groups under Article 8 of the Investment Firms
Regulation (IFR). Under Article 8, investment firm groups are required to meet
consolidated regulatory requirements, much like banking groups under the
Capital Requirements Regulation (CRR).
This
includes obligations regarding capital adequacy, risk management , and
governance on a consolidated basis, ensuring that the entire group meets
prudential standards, not just individual firms within the group.
“CySEC has
adopted the Guidelines by incorporating them into its supervisory practices and
regulatory approach,” the regulator commented in a circular signed by Dr.
George Theocharides, the watchdog’s Chairman.
“The
Guidelines specify how competent authorities should implement Article 8(1) and
Article 8(4) of IFR to allow investment firm groups to apply the group capital
test, or to hold a lower amount of own funds.”
The
guidelines outline specific conditions under which Cypriot Investment Firms
(CIFs), including FX/CFD brokers, may be considered sufficiently simple and
low-risk. This classification could potentially allow companies to apply for
special permissions regarding their capital requirements.
C662 – Adoption of the European Βanking Αuthority (the ‘EBA’) Guidelines on the application of the group capital test for investment firm groups in accordance with Article 8 of Regulation (EU) 2033/2019 (the ‘IFR’)https://t.co/G5gsbvY7pw
— CySEC – Cyprus Securities and Exchange Commission (@CySEC_official) October 22, 2024
Under the
new framework, FX/CFD brokers in Cyprus seeking to implement Article 8
provisions or hold reduced own funds must submit comprehensive information
through CySEC’s portal. This includes detailed group structures, descriptions
of trading activities, and precise capital requirement calculations.
A key
feature of the guidelines is the introduction of a potential threshold for
granting lower capital amount permissions. CySEC may consider such permissions
when a CIF’s own funds requirements under Article 8(3) exceed those under
Article 7 by at least 125%.
CySEC
emphasized its authority to revoke permissions if conditions are no longer met,
which could result in groups being subjected to consolidated supervision under
Article 7 of the IFR.
Cyprus Sets Deadline Ahead
of EU Regulations
In a separate
move, CySEC has announced another deadline, this time for crypto-asset service
providers as the European Union prepares to implement new regulations. CySEC
will stop accepting notifications from European Economic Area (EEA) firms for
cross-border crypto services on October 30, 2024. This deadline comes just two
months before the Markets in Crypto-Assets (MiCA) regulation takes effect for
crypto service providers on December 30, 2024.
Press Release – CySEC will not accept new applications for CASPshttps://t.co/ShIO6Lw8ai
Δελτίο Τύπου – Δεν θα αποδέχεται νέες αιτήσεις για ΠΥΚΣ η ΕΚΚhttps://t.co/eAbtQuWvae— CySEC – Cyprus Securities and Exchange Commission (@CySEC_official) October 17, 2024
Firms that
notify CySEC by the October 30 deadline will be allowed to continue their
cross-border operations during a transitional period until July 1, 2026, or
until they receive a decision on their MiCA authorization, whichever comes
first12. CySEC has already stopped accepting registrations for Crypto-Asset
Service Providers (CASPs) under national rules as of October 17, 2024.
These
changes are part of a broader effort across the European Union to implement
MiCA, which aims to create a harmonized regulatory framework for crypto-assets.
Crypto-asset service providers in Cyprus now face a clear timeline: they must
submit notifications to CySEC by October 30, 2024, prepare for MiCA compliance
by December 30, 2024, and obtain MiCA authorization by July 1, 2026, at the
latest, to continue operations.
The Cyprus
Securities and Exchange Commission (CySEC) has announced the adoption of new
European Banking Authority (EBA) guidelines that will impact FX/CFD brokers
operating as Cyprus Investment Firms (CIFs). According to the latest circular
from the market watchdog, they will take effect at the beginning of 2025.
Cyprus Regulator
Introduces New Capital Test Rules for Investment Firms
The
guidelines, set to take effect next year, clarify the application of the group
capital test for investment firm groups under Article 8 of the Investment Firms
Regulation (IFR). Under Article 8, investment firm groups are required to meet
consolidated regulatory requirements, much like banking groups under the
Capital Requirements Regulation (CRR).
This
includes obligations regarding capital adequacy, risk management , and
governance on a consolidated basis, ensuring that the entire group meets
prudential standards, not just individual firms within the group.
“CySEC has
adopted the Guidelines by incorporating them into its supervisory practices and
regulatory approach,” the regulator commented in a circular signed by Dr.
George Theocharides, the watchdog’s Chairman.
“The
Guidelines specify how competent authorities should implement Article 8(1) and
Article 8(4) of IFR to allow investment firm groups to apply the group capital
test, or to hold a lower amount of own funds.”
The
guidelines outline specific conditions under which Cypriot Investment Firms
(CIFs), including FX/CFD brokers, may be considered sufficiently simple and
low-risk. This classification could potentially allow companies to apply for
special permissions regarding their capital requirements.
C662 – Adoption of the European Βanking Αuthority (the ‘EBA’) Guidelines on the application of the group capital test for investment firm groups in accordance with Article 8 of Regulation (EU) 2033/2019 (the ‘IFR’)https://t.co/G5gsbvY7pw
— CySEC – Cyprus Securities and Exchange Commission (@CySEC_official) October 22, 2024
Under the
new framework, FX/CFD brokers in Cyprus seeking to implement Article 8
provisions or hold reduced own funds must submit comprehensive information
through CySEC’s portal. This includes detailed group structures, descriptions
of trading activities, and precise capital requirement calculations.
A key
feature of the guidelines is the introduction of a potential threshold for
granting lower capital amount permissions. CySEC may consider such permissions
when a CIF’s own funds requirements under Article 8(3) exceed those under
Article 7 by at least 125%.
CySEC
emphasized its authority to revoke permissions if conditions are no longer met,
which could result in groups being subjected to consolidated supervision under
Article 7 of the IFR.
Cyprus Sets Deadline Ahead
of EU Regulations
In a separate
move, CySEC has announced another deadline, this time for crypto-asset service
providers as the European Union prepares to implement new regulations. CySEC
will stop accepting notifications from European Economic Area (EEA) firms for
cross-border crypto services on October 30, 2024. This deadline comes just two
months before the Markets in Crypto-Assets (MiCA) regulation takes effect for
crypto service providers on December 30, 2024.
Press Release – CySEC will not accept new applications for CASPshttps://t.co/ShIO6Lw8ai
Δελτίο Τύπου – Δεν θα αποδέχεται νέες αιτήσεις για ΠΥΚΣ η ΕΚΚhttps://t.co/eAbtQuWvae— CySEC – Cyprus Securities and Exchange Commission (@CySEC_official) October 17, 2024
Firms that
notify CySEC by the October 30 deadline will be allowed to continue their
cross-border operations during a transitional period until July 1, 2026, or
until they receive a decision on their MiCA authorization, whichever comes
first12. CySEC has already stopped accepting registrations for Crypto-Asset
Service Providers (CASPs) under national rules as of October 17, 2024.
These
changes are part of a broader effort across the European Union to implement
MiCA, which aims to create a harmonized regulatory framework for crypto-assets.
Crypto-asset service providers in Cyprus now face a clear timeline: they must
submit notifications to CySEC by October 30, 2024, prepare for MiCA compliance
by December 30, 2024, and obtain MiCA authorization by July 1, 2026, at the
latest, to continue operations.
This post is originally published on FINANCEMAGNATES.
