The Legal Service has blocked the bill on decentralized technologies, citing arguments of unconstitutionality and legislative redundancy as identified by the General Prosecutor’s Office, raising questions in the legal and operational sectors.
Overview
In June 2018, the Republic of Cyprus signed the European Cooperation on Blockchain Technology, and in December 2018, along with six other European Union member states, it signed the joint Declaration of Southern Mediterranean Countries on Distributed Ledger Technologies to enhance digital cooperation. This led to the development of the National Blockchain Strategy to promote and implement Distributed Ledger Technology and blockchain in both the private and public sectors. After consultations with local authorities involving the Ministry of Finance and the Central Bank of Cyprus, the bill titled “The 2021 Distributed Catholic Technology Act” was proposed.
Arguments by the Legal Service and the Ministry of Finance
The Legal Service of the Republic, upon legislative review of the bill and taking into account the comments received in 2021, recently decided to deem it unconstitutional, thus blocking its implementation.
The main argument on which the Legal Service of the Republic relied for this decision pertains to the provisions of the bill, which were considered redundant in comparison to existing legislation, with the potential to create restrictions.
The withdrawal of the bill by the Ministry of Finance was based on both the decision of the Legal Service and the argument that the expected European MiCA regulation by the European Union, which is anticipated in the coming weeks, will cover many aspects of blockchain technologies and cryptocurrencies, rendering the usefulness of the 2021 bill obsolete.
Private enterprises operating in the blockchain sector have expressed their concerns, as they believed that the 2021 legislative framework for blockchain technologies was expected to modernize and streamline their operations.
Furthermore, legal circles and individuals have pointed out that the forthcoming European MiCA regulation does not cover all legal aspects, focusing more on regulatory authorities rather than the individual legislations governing business operations. They consider a unified national policy framework necessary, as without an alternative national bill or any relevant initiative, the regulatory framework for blockchain technologies in Cyprus will continue unchanged until the adoption of the European regulation, with potential consequences for technology companies.