The Cyprus Securities and Exchange Commission (CySEC) has issued a decisive circular to all regulated entities, reinforcing obligations under the European Council’s 19th package of restrictive measures adopted on October 23. These measures were introduced to counteract actions that undermine the territorial integrity and sovereignty of Ukraine.
Redefined Ownership And Control
Significantly, the circular clarifies the definitions of “owning” and “controlling” a legal person or entity. Under these updated guidelines, “owning” is defined as possessing 50 percent or more of the proprietary rights or having a majority interest—even when holding less than 50 percent, if the designated person is the largest shareholder. For instance, a designated person with a 40 percent stake in an entity may be considered to have majority interest if the remaining shares are divided equally among three shareholders.
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Implications For Crypto And Financial Services
The renewed framework impacts a wide range of financial institutions, including Cyprus Investment Firms, Administrative Service Providers, UCITS and AIF management companies, crypto asset service providers, and small AIFMs. Entities are reminded that control may be established by factors such as the power to appoint or control the majority of management and voting rights, thereby necessitating a thorough analysis of all relevant factors.
Expanded Prohibitions And Economic Measures
The restrictions extend to include a prohibition on providing crypto-asset services, issuing payment instruments, acquiring payment transactions, initiating payments, or issuing electronic money to Russian or Belarusian nationals, residents, or entities.
Moreover, a new article addresses Russia’s special economic, innovation, or preferential zones, banning the acquisition, participation, or extension of ownership in such regions. This includes the creation of new joint ventures, branches, representative offices, or entering into new contracts involving the supply of goods, services, or intellectual property linked to these zones. By January 25, additional sanctions will be implemented to preclude any ongoing ownership or contractual partnerships related to these zones.
Mandatory Compliance And Reporting
In alignment with these measures, entities are required to freeze all funds and economic resources of any legal person, entity, or body that is owned or controlled by a designated person. Exceptions are provided for activities essential to public health, humanitarian needs, or critical energy supplies, including natural gas and certain raw materials.
Furthermore, CySEC has mandated that regulated entities affected by these changes must notify the commission within one month by emailing details at contact@cysec.gov.cy. Entities are strongly encouraged to review and implement targeted compliance measures in accordance with EU Best Practices and the European Commission’s Consolidated FAQs.
Conclusion
By issuing these amendments, CySEC underscores its commitment to uphold rigorous regulatory standards in the face of evolving geopolitical challenges. This decisive action prompts regulated entities to reassess business relationships and operational frameworks, ensuring alignment with the strategic objectives of the European Union’s sanctions policy.
