On the 8th of March 2021, CX Financia’s Managing Director Xenia Neophytou, had the honour to talk about the fintech sector and innovative research in Cyprus at the Cyprus Fintech Summit – Women’s Day Edition. Below you can find the first part of what Xenia talked about at the summit.
A New Era for the Start-Up and Technology Space in Cyprus
Cyprus has made remarkable progress concerning innovative businesses. Even though 2020 was a challenging year, the Cyprus fintech industry emerged stronger than ever because of:
- The introduction of new national policies to reinvent technology
- More state funding for the technology industry
- Incentives to attract more IT start-up businesses and regional headquarters
Are Financial Regulators and Policymakers in Cyprus Open to FinTech Innovation?
The incentives introduced by the Cyprus government to entice foreign investment have been successful over the last years. In terms of operating in the fintech industry, Cyprus has an opportunity, and we see serious efforts to adopting a more progressive outlook.
The current regulatory regime governing Cyprus’ financial services sector is doing much through innovative reforms and incentives. The objective is to achieve the island’s ambition of becoming a leading international financial centre. Automating public service, upgrading networks, and promoting entrepreneurship and start-up businesses are key goals of Cyprus to strengthen its global competitiveness in the industrial revolution.
Which are the Benefits for the FinTech Business Sector in Cyprus?
There are several benefits for the fintech business sector in Cyprus, which are:
- Cyprus’ tax regime: One of the most attractive and transparent tax systems in Europe.
A low corporate tax at 12.5% and a developed network of double tax treaties, boosted investment in fintech. Cyprus also offers an 80% tax exemption, on qualifying profits arising out of the exploitation of R&D intellectual property qualifying assets (the IP Box Regime), taking advantage of effective tax as low as 2.5%. The attestation of the program’s success is the significant number of multinational companies and international banking units already operating in Cyprus. Moreover, more than 8k IT professionals serve the fintech industry locally.
- Cyprus’ legal framework is particularly strong.
Cyprus has put in place all necessary mechanisms for the prevention and suppression of money laundering and terrorist financing activities, being fully compliant with all relevant EU directives.
- Initiatives from the public sector to fintech innovation
As a matter of national strategy, Cyprus has also placed special emphasis on innovation, research and start-up businesses, which are closely related to fintech development.
In the last years, competent public authorities and regulators in Cyprus have shown an active interest in fintech development. We have seen Cyprus participating in a plethora of blockchain initiatives in the private or public sphere all of which are expected to positively impact the delivery of fintech services.
The financial services are recognised as pivotal for the island’s economy and are bound to receive specialised support from the Government. Cyprus recognises that innovation and research are instrumental for the horizontal development of its economy.
For this purpose, the Cyprus government has set up a Deputy Ministry of Research, Innovation and Digital Policy under the direction of the Ministry of Finance.
The Deputy Minister, Mr. Kokkinos, in his keynote speech at the Fintech summit, explained the objectives of the Deputy Ministry which include promoting, guiding and developing the digital transformation of Cyprus, while facilitating the operation of startup businesses and supporting the Institute for Research and Innovation. Additionally, there is a generous support package with state and EU funds to spend on a number of projects over the next 3 years.
CySEC’s Dynamic and Inviting Innovation Hub
CySEC has also been actively involved with the development of fintech and has established its own Innovation Hub. The Innovation Hub is operating as a knowledge share-point between CySEC and interested Fintech and RegTech entities. This allows for the seamless transfer of information on how existing regulation applies to new products. Additionally, it is helping identify what regulatory frameworks might need to be established to meet evolving needs without stifling innovation.
As reported, CySEC engaged and consulted with several entities innovating in the financial sector, including the area of cryptoassets, DLT regulatory, AML compliance tools and other disruptive technologies.
Furthermore, and within this context, CySEC is currently contemplating the launch of a Regulatory Sandbox. Other initiatives include the Cyprus National strategy for Decentralised Technologies.
To conclude, in terms of operating in the fintech industry, Cyprus has an opportunity by transforming its regulatory approach and by adopting a more progressive outlook.
If you are interested in reading more about what was discussed during the Cyprus Fintech Summit, check out our next articles, “The FinTech Landscape in Cyprus and Regulatory Updates” and “Cryptoassets: The Regulatory Approaches in Europe and Cyprus”.
How can CX Financia Help You?
For us at CX Financia, our interest in fintech and blockchain technologies was a natural progression. It is something our clientele is interested in and we have managed to successfully merge technology with regulation, creating a complete offering to our customers. We are actively assisting our clients from startups to financial institutions harness their ideas implementations.
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