Cyprus Securities and Exchange Commission, known as CySEC, is the agency responsible for the regulation of the financial service industry in the Republic of Cyprus. Since 2012, CySEC has sought to regulate the binary options industry in Cyprus. Binary options are now classified as “financial instruments that fall within the remit of the Investment Services and Activities and Regulated Markets Law of 2007-2009.”
The granting of Cyprus Investment Firm licenses to binary options brokers is a clear indication of their belief that the binary options industry is a legitimate one. Because of this, CySEC has become a forefront authority in the monitoring and controlling of online trading.
On the other hand, while acknowledging the legitimacy of binary options trading, CySEC’s views on Bitcoins have been much less favourable. In February 2014, CySEC published a public statement that effectively warned investors and traders of the high risks associated with virtual currencies, namely Bitcoins. This warning was essentially a reiteration and concurrence of the European Banking Authority’s stance on virtual currencies. The risks outlined included the loss or theft of this virtual currency, the volatility of its value, and the massive potential of illegalities due to anonymity.
Ironically, Bitcoins are very popular in Cyprus and many regulated binary options brokers offer Bitcoin trading. To date, CySEC has not issued any prohibition on Bitcoin trading; nor has it specifically delved into the legality of this virtual currency. However, the government of Cyprus has made it abundantly clear that Bitcoins unregulated status offers zero protection to persons who use it for financial transactions.
A consensus amongst Bitcoin advocates is that the Cyprus government is simply not knowledgeable enough on Bitcoins and further dialogue is needed. Just like the regulation of binary options trading, Bitcoins’ proponents and interested parties are rallying CySEC to once again take the lead and create a regulatory system for Bitcoins. The government has yet to officially respond to this movement but it will definitely be interesting to see how this unfolds.