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Cysec Adopts EBA Guidance On Dual Regulatory Framework For Electronic Money Tokens

The Cyprus Securities and Exchange Commission (CySEC) has formally updated cryptoasset service providers (CASPs) and prospective applicants regarding new guidelines from the European Banking Authority (EBA). The update follows the EBA’s June 10, 2025 opinion, which addresses the regulatory treatment of electronic money tokens (EMTs) under both the Markets in Crypto-Assets (MiCA) Regulation and the existing Payment Services Directive (PSD2).

Background And Context

Triggered by the European Commission’s December 2024 request, the EBA provided both short- and long-term recommendations to manage the inherent dual nature of EMTs as regulated under MiCA (Regulation (EU) 2023/1114) and as electronic money under Directive (EU) 2015/2366 (PSD2). The authority’s opinion forms part of a strategic effort to enhance consumer protection and ensure the stability of digital payment systems across the European Union.

Eba’s Long-Term Recommendations

In its long-term strategy, the EBA advised EU policymakers to amend the MiCA Regulation to incorporate payment-related obligations for EMTs. These amendments would enhance consumer protection, enforce robust security measures for payments, and introduce capital requirements. As an alternative, the EBA proposed integrating rules for EMTs into the forthcoming legislative processes for PSD3 and Payment Services Regulation (PSR), thereby alleviating the need for CASPs to secure a separate authorisation.

Short-Term Guidance Under The Existing Regulatory Framework

In the interim, as PSD2 remains active, the EBA issued practical guidance to National Competent Authorities (NCAs) to ease the regulatory load on CASPs. Key recommendations include:

  • Considering the transfer, custody, and administration of EMTs as payment services under PSD2;
  • Classifying custodial wallets as payment accounts;
  • Excluding the exchange of crypto-assets for funds or other crypto-assets—as defined by MiCA—from being regarded as payment services, thus avoiding unnecessary secondary authorisation.

Furthermore, a transitional period until March 1, 2026, has been advised for those CASP activities that require PSD2 authorisation. During this phase, entities may either apply for authorisation or collaborate with an existing payment service provider (PSP). For authorised entities or those holding a PSP licence, NCAs are expected to temporarily de-prioritise enforcement of select PSD2 provisions, such as safeguarding requirements and disclosure obligations, while maintaining critical measures like strong customer authentication and fraud reporting.

Implications And Next Steps

CySEC has urged all relevant stakeholders to consult the full EBA opinion to fully understand the legal basis and detailed advice on navigating the complex interplay between MiCA and PSD2. The clarity provided in this guidance underscores the EU’s commitment to a balanced regulatory approach that mitigates risk without stifling innovation in the cryptoasset sector.

Signed by George Theocharides, chairman of the Cyprus Securities and Exchange Commission, this update marks a significant milestone in regulatory convergence for digital finance across Europe.

FinTech’s Dominance In MENA: Three Strategic Drivers Behind Unyielding VC Success

Despite facing tightening global liquidity and macroeconomic headwinds, the FinTech sector continues to assert its leadership in the MENA region. In the first half of 2025, FinTech emerged as the most resilient and appealing arena for venture capital investments, proving its worth as a catalyst for financial innovation and inclusion.

Addressing Structural Financial Gaps

In many parts of MENA, a significant proportion of the population remains underbanked and underserved by traditional financial institutions. FinTech companies are uniquely positioned to address these persistent challenges by bridging critical access gaps and driving financial inclusion. With the proliferation of payment apps, digital wallets, and micro-lending platforms, investors have witnessed firsthand how these solutions pave the way for scalable growth and eventual exits. Early-stage momentum in the region is underscored by a doubling of pre-seed deals year-over-year, reinforcing the sector’s capacity for rapid innovation and sustainable expansion.

Highly Scalable and Replicable Business Models

One of the key factors behind FinTech’s dominance is the inherent scalability of its business models. Once the necessary infrastructure and regulatory approvals are in place, these models have demonstrated robust performance across borders. The first half of 2025 saw a marked acceleration in deal activity, with payment solutions leading the charge with 28 deals in MENA—a significant increase over the previous year. Lending platforms, in particular, experienced a meteoric 500% year-over-year increase in funding, emerging as the fastest-growing subindustry. Such replicability makes FinTech an attractive proposition for investors seeking high-growth opportunities in diverse markets.

Supportive Regulatory And Government Backing

The strategic support offered by key government initiatives in the UAE and Saudi Arabia has been instrumental in propelling the FinTech sector forward. Progressive frameworks, such as the UAE’s open finance and digital asset directives, coupled with Saudi Arabia’s live-testing sandboxes, have materially lowered entry barriers for startups. These measures not only foster innovation but also streamline the path to commercialization. Consequently, the combined efforts of these regulatory bodies have enabled the UAE and Saudi Arabia to account for 86% of MENA’s total FinTech funding in H1 2025.

The resilience of FinTech in MENA is not merely a reflection of contemporary market trends—it signals a fundamental shift in the region’s economic fabric. With an unwavering commitment to addressing real financial challenges, scalable and replicable business practices, and robust regulatory support, FinTech is setting the benchmark for sustainable innovation. As capital markets become increasingly discerning, this sector stands out as a beacon of long-term growth and transformative impact.

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