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General climate and trends
General innovation climate
What is the general state of fintech innovation in your jurisdiction, including any notable trends, innovations, innovators and future prospects?
Cyprus has long been established as an international financial and business centre of excellence due to its unique combination of favourable factors and comparative advantages which make it extremely attractive for business as well as for its standard of living.
Cyprus has a sophisticated and strong financial services sector with important banking, investment and financial players, which makes it attractive to fintech businesses. At a time when the pace of technological evolution has increased, barriers to enter the market have been reduced, customer expectations are on the rise and venture capital funding has considerably increased, fintech businesses and start-ups – as well as SMEs and larger companies – are looking to:
- establish themselves in Cyprus through investment, partnerships and collaborations; and
- exploit the opportunities that the country’s dynamic fintech sector offers to grow their business.
- a developed free market economy with a long record of successful economic performance (eg, its economic recovery following the 2013 bailout, which has been much faster than initially anticipated);
- forward-thinking regulators;
- a strategic geographical location at the hub of Europe, the Middle East and Africa;
- a well-established common law legal system that is familiar to most financiers;
- the lowest corporate tax rate in Europe (12.5%);
- a long list of double tax treaties and a special holding company regime;
- unparalleled tax incentives in line with the European Union (eg, for start-ups and small innovative companies, to fintech businesses and entrepreneurs to protect and commercially exploit their IP rights);
- a highly qualified, multilingual, knowledgeable and experienced workforce in the services industry;
- an advanced telecoms network and infrastructure; and
- a high standard of living.
Conversely, a high percentage of the financial market’s strong traditional players are looking to make a tech-driven move through partnerships and collaborations towards fintech in order to remain competitive.
Successive governments, regulators and financial services market stakeholders have recognised the importance of fintech and the potential offered by digitisation, innovation and technology. The government and regulators have adopted approaches, measures and strategies to support and promote the development and use of fintech, as well as the establishment of fintech businesses and those which offer fintech services and products, with a view to establishing Cyprus as a global fintech hub and ensuring that it acquires and retains the attributes needed to make it a fintech leader.
Cyprus launched its Digital Strategy in 2012, which is in line with the Digital Agenda for Europe and promotes information and communication technology in all sectors of the economy. There is also an e-government strategy and a relevant plan in place. Cyprus also adopted a national cybersecurity strategy in 2012.
Science and technology park
Cyprus is currently at the proposal stage for the development and operation of a science and technology park, which will likely pave the way for making it a fintech hub of choice and excellence and has already attracted international interest.
Fintech activity and types of fintech business
Fintech activity in Cyprus has increased considerably in the past five years. This increase has been even more notable in the past two to three years, with the establishment of new fintech businesses by:
- start-ups and SMEs; and
- larger well-established financial services companies and organisations which innovate and develop fintech products and services.
Foreign exchange companies and international money transfer businesses are leading the way due to the recognition of Cyprus as a global specialist centre for retail foreign exchange. These companies include electronic money institutions, such as:
- prime brokerages;
- major platform providers;
- liquidity management companies;
- specialist professional services firms;
- regulatory technology companies (regtech); and
- reporting companies.
Other fintech companies include:
- authorised credit institutions (either Cyprus-incorporated institutions or subsidiaries or branches of foreign credit institutions);
- investment firms;
- undertakings for collective investment in transferable securities; and
- other payment institutions.
Further, a number of information and communication technology companies from the United States, Europe, Russia and Australia now run their regional headquarters from Cyprus and service clients globally. For example, TransferWire recently included Cyprus in a list of eight emerging global technology hubs.
PSD II regulations and open banking
The EU Payment Services Directive (PSD II 2015/2366/EC) regulations have been transposed into Cyprus law and been in force since 13 January 2018. Payment service providers must comply with the new provisions and activate open banking platforms to support the sharing of information. As a result, incumbent banks and other payment institutions have undertaken different initiatives not only to innovate and comply with the law, but also as a strategic response to preserving their market share. Most of these institutions have established their own application programming interface platforms (some before PSD II came into force) and some are already looking into biometrics and other technologies to achieve the required customer authentication and protection. Concurrently, the number of third-party providers (eg, account information service providers and payment initiation service providers), such as tech start-ups, technicians and programmers, is growing and the Central Bank is accepting and evaluating relevant applications to provide the required authorisations as per the law and regulations.
Partnerships and collaborations between fintech and existing institutions
Fintech companies in Cyprus are currently offering products and services outside their core business model through innovative platform-based models. Further, such companies offer their customers new products and services, which has fostered changes to the traditional business models, services and products offered by existing institutions and financial services players. Existing institutions wish to remain competitive and, as a result, a number of partnerships and collaborations – in the form of investments (including acquisitions), cooperation or collaborations – between fintech start-ups and existing institutions have been formed or announced, reflecting the need for collaboration-driven innovation brought about by the market disruption.
Financial services remain the fastest growing sector of Cyprus’s economy. The emergence of fintech is rapidly turning Cyprus into a dynamic fintech hub. As of 2016, the Cyprus Securities and Exchange Commission (CySEC) has regulated many of the world’s biggest brands in retail foreign exchange, which are already using cutting-edge fintech and regulatory technology.
Have there been any particular developments – regulatory or commercial – in any of the following fintech sectors?
a) Distributed ledger technology and digital currencies (eg, blockchain, smart contracts and Bitcoin)?
Distributed ledger technologies and blockchain are of great interest to the Cyprus financial services industry. These technologies were introduced to the Cyprus market relatively early and almost simultaneously with bitcoin and other digital currencies. Arguably, this was not only an advancement of a strong financial services market, but also a consequence driven by the need of individual entrepreneurs, incumbents, technology start-ups and organisations to find solutions following the unprecedented ‘hair-cut’ in 2013 due to the banking crisis and liquidation of one of Cyprus’s biggest banking institutions.
The University of Nicosia is the first accredited university in the world to accept bitcoin payments. It launched an MSc in digital currency in 2014 and has proposed the establishment of a comprehensive framework for developing Cyprus into a hub for bitcoin trading, processing and banking.
Further, the University of Nicosia houses the Institute for the Future, an interdisciplinary research centre aimed at advancing emerging technologies and contributing to their effective application in industry, government, education and society. The institute aims to become a leading academic institution and global player, spearheading interdisciplinary innovation in Cyprus, the European Union and globally.
The Institute for the Future focuses on the following technologies:
- distributed ledger technology (blockchain);
- artificial intelligence and intelligence augmentation;
- virtual and augmented reality;
- robotic applications; and
- self-driving vehicles.
Fintech businesses in Cyprus are actively exploring the benefits of distributed ledger technologies and blockchain and many already have corresponding business models, software and solutions. For example, Lykke Cyprus, a global marketplace for the free exchange of financial assets, is fully regulated and authorised by the CySEC. Lykke’s marketplace promotes equal access from anywhere in the world and its aim is to create a global marketplace for all asset classes based on distributed ledgers and blockchain technologies, starting with the financial markets through its Cyprus investment firm. The firm won Cyprus’s 2017 Fintech Digital Championship Award – a major initiative backed by the European Commission.
CySEC has recognised the potential and practical impact of these technologies and issued a number of consultation documents, which can be found on its website. Cyprus has welcomed cryptocurrencies and initial coin offerings (ICOs), with CySEC’s chair stating in 2017 that:
- ICOs are a means to generate small funds to finance start-ups; and
- CySEC will focus on ICOs in 2018.
The chair further added that “we think it’s a product, a way to raise small funds to finance start-ups [and] 2018 is the time to put crowdfunding in place. We have given it priority”. Although activities relating to virtual currencies are not regulated by CySEC – unless a virtual currency falls under the existing regulatory framework, as per CySEC’s announcements dated 15 November 2017 – it has introduced new rules for trading bitcoin and digital currencies, including:
- leveraging the limit at five-to-one ratio for trading in contracts for differences in relation to virtual currencies, provided that the total volume from digital currency trading for each broker does not exceed 15% of the total broker volume each quarter of the calendar year;
- brokers must use more than one feed provider for each cryptocurrency; and
- virtual currency instruments are not automatically subject to EU Markets in Financial Instruments Directive (2004/39/EC) (MiFID I) passporting rights.
Further, CySEC has announced that it is particularly interested in the regulatory implications of shared distributed ledgers and is testing how such technology could grant it greater oversight of over-the-counter markets. ICO founders must comply with a number of single market regulations. However, ICOs are largely unregulated at present, so there are benefits to launching in Cyprus, including access to:
- its exhaustive list of double tax treaties; and
- EU member states, which are fully compliant with EU laws and regulations and enjoy white-list status among tax authorities globally.
More importantly, on 27 July 2018 CySEC announced the establishment of its Innovation Hub, designed to address and explore the rise of fintech and regtech developments. The announcement states as follows:
The innovation hub will be a place where both supervised and non-supervised entities in innovative or new industries will have ongoing access to CySEC to best understand and implement their regulatory requirements. Furthermore, it will be a platform for dialogue between innovative industries that operate in the fintech and regtech spaces in this way facilitating the exchange of information.
The Innovation Hub is expected to become operational in September 2018. Eligible firms (eligibility criteria will be announced once the hub is operational) interested in having their sector or products included on the platform and examined by the Innovation Hub will be able to submit a request for further study once the hub is operational.
Smart contracts and their application and use is another technological evolution which the government is reviewing at present. The Cyprus Standardisation Organisation is the national standardisation body and a member of the International Standardisation Organisation. The Cyprus Standardisation Organisation participates in the International Standardisation Organisation/Technical Committee 307 for Blockchain and Distributed Ledger Technologies and actively contributes to the specialised working group for smart contracts, which aims to issue international standards, technical specifications and technical reports concerning smart contracts and their uses.
Fintech ecosystem and initiatives
Cyprus Blockchain Technologies Ltd, which is a non-profit organisation established as a collaboration among academic institutions – including the Cyprus International Institute of Management, the University of Nicosia, local regulators, financial institutions and banks (including Hellenic Bank and the Bank of Cyprus) and other technology associations and companies – is conducting research into:
- distributed ledger technologies;
- digital currencies;
- bitcoin; and
- smart contracts.
The centre aims to conduct cutting-edge research into blockchain and distributed ledger technology applications and organise transfer of knowledge sessions, roundtable discussions and executive education seminars into blockchain technologies by bringing together prominent academics and professionals from leading organisations around the world.
Further, Blockchain Cyprus, a non-profit association, has also been established with similar aims of promoting distributed ledger technologies and blockchain and their application in Cyprus.
MAP Fintech is a firm that specialises in regulatory reporting solutions arising from the requirements of a number of complex and challenging international regulations, including:
- the EU Markets in Financial Instruments Directive (2014/65/EU) (MiFID II);
- the European Market Infrastructure Regulation;
- the EU Regulation on Energy Market Integrity and Transparency (REMIT) (1227/2011);
- the Dodd-Frank Act;
- the Foreign Account Tax Compliance Act;
- the Common Reporting Standard; and
- the EU Securities Financing Transactions Regulation (2015/2365).
The firm collaborates with Oracle’s platinum partner Polaris for the use of its regtech reporting product, Workbench.
b) Alternative lending platforms?
There are no active alternative lending platforms in Cyprus and it seems unlikely that any will be established in the near future. More specifically, as per the Business of Credit Institutions Law, only licensed credit institutions can engage in the business of taking deposits or any other repayable funds, unless specifically authorised by the Central Bank. In such cases, a prospectus may be required for the offering of securities to the public.
(c) Digital payments, remittances and foreign exchange?
In relation to digital payments and payment services, a great number of fintech start-ups, but also incumbents that have adopted innovative technologies, provide a range of payment solutions. PSD II, which was has been in force since 13 January 2018, will likely re-energise the financial market with regard to digital payments and the payment of services more generally. Under the new payment rules, payment surcharge fees within the Single European Payments Area are now banned for certain types of cashless and consumer-related payment.
Further, open banking brought about by PSD II allows payment service providers to access their clients’ bank account details via their open banking application programming interfaces .
Remittances in Cyprus refer mainly to remittances from migrants and short-term employee income transfers (personal remittances). In addition to digital payment activities, payment institutions can engage in remittance activities.
Article 48(2) of the Central Bank’s Laws of 2002 to 2007 makes banks the responsible authorities for granting licences and supervising and regulating businesses engaged in the provision of money transfer services to and from Cyprus. In accordance with the above legal arrangement, the Central Bank issued a directive which regulates the taking up and pursuit of such activities. The directive came in force on 1 September 2003 and includes provisions regarding, among other things, the prevention of money laundering, which all money transfer businesses must comply with by taking all necessary measures for their implementation.
Cyprus is becoming one of Europe’s largest foreign exchange hubs. CySEC’s move to add retail foreign exchange as a duly regulated financial product under MiFID I has made Cyprus only the second EU member state to do so after the UK Financial Conduct Authority.
More than 250 regulated foreign exchange companies have been established in Cyprus due to the unparalleled advantages offered. CySEC is top of the list of the most experienced and respected foreign exchange regulators.
(d) Alternative financing (including crowdfunding)?
The crowdfunding business in Cyprus is at an embryonic stage. Some initiatives have taken place since 2016, but crowdfunding has not yet evolved and no crowdfunding-specific laws and regulations have been put in place.
Crowdfunding Cyprus, an initiative established by KPMG and the Anirot Development Organisation, organised a conference on 15 June 2016 to encourage the development of national legislation, equity and lending-based crowdfunding.
There are a small number of crowdfunding platforms in Cyprus mainly based on donation or rewards-based crowdfunding. They primarily involve campaigns supporting charitable causes or innovative ideas and remain at the idea stage. At present, there are no equity-based or lending-based crowdfunding platforms or crowdfunding platforms for investing in real estate or renewable energy projects.
As regards equity-based crowdfunding, it seems that such activity may fall under the Investment Services and Activities and Regulated Markets Law (144(I)/2007), which implemented the EU Markets in Financial Instruments Directive (2014/65/EU) and repealed the EU Markets in Financial Instruments Directive (2004/39/EC) and the EU Regulation on Markets in Financial Instruments (600/2014).
As regards lending-based crowdfunding platforms, see the above section on alternative lending platforms.
As regards initial coin offerings and virtual currencies, it seems that the specific characteristics or nature of each particular instrument (ie, its utility or security) will most likely determine whether it falls within the scope of current laws and regulations, such as MiFID I and MiFID II, the EU Prospectus Directive (2003/71/EC), the EU Alternative Investment Fund Managers Directive (2011/61/EC) and the EU Markets in Financial Instruments Directive (2004/39/EC). Other relevant national laws and regulations may also be triggered depending on the circumstances.
(e) Investment, asset and wealth management?
Fintech is definitely shaping investment, asset and wealth management in Cyprus. Cyprus is home to a considerable number of licensed investment, asset and wealth management firms that are regulated to provide investment advice, portfolio management, the reception and transmission of orders, custody services and asset consolidation services. Many of these firms have recognised that data and digitisation constitute a successful combination for improving their performance. Accordingly, they have already embraced technological advancements and are testing distributed ledger technologies and blockchain and conducting research into smart contracts, artificial intelligence and robo-advisers.
(f) Robo-advice and artificial intelligence?
There have been no significant developments in robo-advice or artificial intelligence, although several significant incumbents are contemplating or are in negotiations to acquire or license such digital platforms or applications to automate their procedures and be able to:
- recommend the best steps to grow a client’s wealth;
- make automated investments and balanced allocations; and
- track a client’s spending based on its banking financial activities and data.
(g) Any other technologies?
A number of companies established in Cyprus are active in the Internet of Things field, which underlines the interest in other technologies such as Big Data analytics, virtual and augmented reality, drones, wearable technology and self-driving vehicles.
How would you describe the regulatory policy for fintech products and services in your jurisdiction?
Fintech products and services are currently treated in the same way as traditional financial products and services. In other words, there is no specific regulatory framework in relation to fintech products and services, which are thus subject to the financial laws and regulations currently in existence. Fintech businesses and their products and services therefore fall under the regulatory regime that regulates the provision of financial products and services when conducting certain financial activities as provided for in the relevant legislation.
Have any fintech-specific laws or regulations been enacted in your jurisdiction? Are any envisaged?
Cyprus has no fintech-specific laws or regulations in existence. The Cyprus Securities and Exchange Commission (CySEC) is in the process of assessing draft legislation on the introduction of a crowdfunding mechanism for start-ups. However, the draft legislation does not cover initial coin offerings. Further legislation may be introduced as the fintech sector in Cyprus matures and evolves, most likely in relation to digital currencies, crowdfunding and initial coin offerings.
Which government authorities regulate the provision of fintech products and services?
The provision of fintech products and services is regulated by the same government regulators and authorities which regulate traditional financial services institutions and products, including:
- the Central Bank, which is responsible for the authorisation, operation and supervision of all payment institutions, including all commercial banks incorporated in Cyprus;
- the superintendent for insurance control; and
- CySEC, which is the financial regulatory agency responsible for the supervision and control of the Cyprus Stock Exchange and controls licensed investment services companies, collective investment funds, fund management companies and consultants.
CySEC grants licences to investment firms and brokers and has the authority to impose disciplinary penalties for deviations from stock market legislation.
Financial regulatory framework
Which laws and regulations governing the provision of financial services apply to fintech businesses?
No regulatory framework applies to fintech businesses. Instead, they are subject to Cyprus’s financial and other relevant laws and regulations. Legislation governing the provision of financial services may apply to fintech businesses provided that they:
- are not covered by an exemption; and
- engage in or carry out certain activities specified or provided for by the relevant law – including:
- the Business of Credit Institutions Laws 1997 to 2017;
- various EU regulations (which have direct effect in Cyprus) dealing with banking regulation, including EU Regulation 575/2013 on prudential requirements for credit institutions and investment firms;
- the Law on Electronic Money;
- the Provision and Use of Payments Services and Access to Payment Systems Law 2018;
- the Securities and Exchange Commission Law;
- the Transparency Requirements Law;
- the Investment Services and Activities and Regulated Markets Law;
- the Takeover Bids Law;
- the Public Offer and Prospectus Law;
- the Open-ended Undertakings of Collective Investments in Transferable Securities Law;
- the Alternative Investment Fund Managers Law;
- the Alternative Investment Funds Law;
- the Securities and Stock Exchange Law; and
- the Prevention and Suppression of Money Laundering and Terrorist Financing Law.
Under what conditions are fintech businesses subject to licensing requirements? Are there any exemptions?
Whether a licence is required will depend on the proposed activity and whether such activity is regulated. If the activity falls under the regulated activities, the conditions to which the fintech business may be subject depends on the category or type of fintech activity.
For example, different licensing requirements apply depending on whether the fintech business wishes to be authorised and conduct regulated activities as a:
- banking or credit institution;
- credit acquiring company;
- financial leasing company or payment institution;
- electronic money company;
- foreign exchange company;
- alternative investment fund; or
Further, fintech businesses are subject to different conditions where they wish to set up:
- a representative office in Cyprus;
- as a branch or subsidiary of an entity established abroad; or
- a representative office abroad of a fintech business incorporated and licensed in Cyprus (ie, passporting provisions).
Passporting can occur in one of two ways:
- establishing branches in other European Economic Area (EEA) countries; or
- providing services across the EEA on a cross-border basis.
The following entities can passport their single licence across the European Union:
- alternative investment fund managers;
- credit intermediaries;
- credit institutions;
- electronic money institutions;
- insurers and reinsurers;
- insurance intermediaries;
- investment firms;
- payment institutions; and
- Undertakings for Collective Investment in Transferable Securities managers.
The procedure to be followed and the time required to obtain a licence or permit for the grant of a required licence therefore depends on what the proposed activity is, the relevant laws governing the same and the requirements of the relevant regulatory authority.
Are any fintech products or services prohibited in your jurisdiction?
No fintech products or services are prohibited in Cyprus. However, the majority of fintech products and services are currently unregulated and ,depending on the activities carried out or to be carried out by a fintech business, such products or services may be considered to fall under the existing regulatory framework. Thus, in such case the fintech business will need to comply with certain conditions or be licensed to conduct such activities (unless it is exempt).
Data protection and cybersecurity
What rules and regulations govern the processing and transfer (domestic and cross-border) of data relating to fintech products and services?
The processing and transfer of data relating to fintech products and services is governed by the EU General Data Protection Regulation (GDPR) (2016/679). The GDPR applies from 25 May 2018.
The GDPR applies to controllers or processors established in the European Union. It also contains express extra-territorial provisions and applies to controllers or processors based outside the European Union that:
- offer goods or services to individuals in the European Union; or
- monitor individuals within the European Union.
Controllers and processors covered by these provisions will need to appoint an EU representative, subject to certain limited exemptions.
What cybersecurity regulations or standards apply to fintech businesses?
Cyprus has implemented comprehensive provisions on cybersecurity through its information and communications technology legislative and regulatory frameworks, which also apply to fintech businesses.
Specific legislation and regulations concerning cybersecurity have been enacted through the following laws:
- the Electronic Commerce Law (156(I)/2004);
- the Law for the Protection of Confidentiality of Private Communications (92(Ι)/1996);
- the Law Regulating Electronic Communications and Postal Services (112(I)/2004), last amended by Law 76(I)/2017;
- the Legal Framework for Electronic Signatures and for Relevant Matters Law (188(I)/2004); and
- the Processing of Personal Data Law (138(I)/2001).
Cyprus is also party to the Council of Europe Convention on Cybercrime, which was incorporated into domestic law through Law 22(III)/2004. The law deals with, among other things:
- illegal access;
- illegal interception;
- data interference;
- system interference;
- the misuse of devices;
- computer-related forgery;
- computer-related fraud;
- offences relating to child pornography;
- offences relating to copyright infringement and related rights; and
- penalties and measures.
What anti-fraud, anti-money laundering or other financial crime regulations govern the provision of fintech products and services?
Cyprus has put in place all of the necessary mechanisms for the prevention and suppression of money laundering and terrorist financing activities.
The provisions of the EU Fourth Anti-money Laundering Directive (2015/849/EC) regarding the prevention of the legalisation of proceeds from illegal activities or terrorist financing have been transposed into national legislation through the 3 April 2018 amendment to the Prevention and Suppression of Money Laundering Activities Law 2007 to 2016.
What precautions should fintech businesses take to ensure compliance with these provisions?
Fintech businesses and generally all physical and legal persons that conduct financial services activities must establish adequate procedures and mechanisms to protect themselves, their companies and Cyprus’s financial system from money laundering. The necessary procedures and mechanisms include:
- measures to identify and report suspicious transactions; and
- the know-your-client principle, which requires the industry to adhere to and apply strict procedures for maintaining accurate and up-to-date records.
What consumer protection laws and regulations apply to the provision of fintech products and services?
Cyprus has a wide range of consumer protection laws, which apply to fintech products and are in line with EU consumer protection legislation, including:
- the Sale of Goods Law;
- the Consumer Rights Law;
- the Unfair Commercial Practices from Businesses to Consumers Law;
- the Consumer Credit Laws of 2010 to 2017; and
- the Law on Credit Agreements for Consumers Relating to Residential Immovable Property.
Does the provision of fintech products or services in your jurisdiction raise any particular competition regulatory concerns?
The provision of fintech products or services raises no particular competition regulatory concerns, provided that the businesses providing such products or services respect the relevant national and EU laws and regulations.
Are there any particular regulatory issues concerning the cross-border provision of fintech products and services (e.g. operating jurisdiction rules and currency controls)?
No particular regulatory issues concern the provision of fintech products and services other than those which would normally apply to other businesses (eg, anti-money laundering and data protection). Exchange control limitations have been abolished in Cyprus.
Financing, investment and government support
Does the government provide any incentives or support programmes to promote fintech innovation in your jurisdiction (e.g. tax incentives, grants and regulatory sandboxes)?
The government provides income tax relief of up to 50% of taxable income for natural persons investing in qualifying start-ups. The upper limit is €150,000 per year. Investors can claim tax relief within five years from the time of the investment
Further, as per the new IP box regime, qualifying taxpayers will be eligible to claim a tax deduction of 80% on qualifying profits resulting from the business use of the qualifying assets. Patents and software copyrights are considered qualifying IP assets.
Has the government concluded any international cooperation agreements to promote and facilitate the cross-border expansion of fintech businesses?
Cyprus will likely sign the relevant declaration and join the European Blockchain Partnership.
Financing and investment
What private financing and investment schemes are available and commonly used for fintech start-ups in your jurisdiction?
Several financing options and routes are available for fintech start-ups and small businesses in Cyprus. Generally speaking, they include:
- personal savings or funding from family, fools and friends;
- EU funding;
- venture capital;
- angel investors;
- crowdfunding; and
- grants and subsidies.
The convertible loan note is a popular method of financing start-ups used at the early stage when conducting a proper valuation of the business may seem difficult or inaccurate. The loan is converted into equity (eg, shares) when the prescribed conditions are met or certain events have occurred.
Grants and subsidies are generally focused on specific types of activity. The normal process for obtaining approval for these grants or subsidies, provided that the conditions are met, is an application to the relevant government or EU department, together with a detailed analysis of the suggested project or activity.
What forms of IP protection are available for fintech innovations?
IP rights protection in Cyprus is extensive. A comprehensive legal framework guarantees that the results of innovation – including fintech innovation and creativity – are protected at the national, EU and international level through specific IP rights, which are granted to the author or inventor (ie, copyright, patents, trademarks and industrial designs).
Copyrights are protected under Law 59/76 on the Protection of Intellectual Property, which offers protection at the national level. Cyprus is a signatory to the Bern Convention for the Protection of Literary and Artistic Works, which covers a broad range of rights, including software copyrights and computer programs, which are directly relevant to the fintech industry.
Copyright on a computer program or software will arise automatically and extend to:
- computer code;
- visual interface features;
- video guides;
- application programming interface structures;
- screen displays or graphics; and
- computational and usability efficiencies, if they exist.
Computer code may cover particulars such as source code, pseudo code, machine code and purpose-built hardware or firmware.
Fintech innovations and products such as hardware may also be protected through the registration of a patent; however, under Cyprus patent law, computer programs are excluded from patentability.
A new invention can be protected by:
- a national patent certificate granted by the Department of the Registrar of Companies and Official Receivers;
- a European patent issued by the European Patent Office; or
- an international patent under the provisions of the Patent Cooperation Treaty, administered by the World Intellectual Property Organisation.
A fintech business which wishes to brand its products or services may choose to register a trademark.
Industrial registered design
Industrial designs should be considered in the case of fintech companies dealing with fintech products such as portable or wearable devices.
What rules govern the ownership of IP rights to fintech innovations?
The author of a work is considered the first owner of its copyright. As regards computer-generated works, the author will be the person who engaged in the necessary creative activity to produce such work. However, if the author of the work has an employment contract or relationship with a fintech business (legal person) or a fintech individual employer (natural person), ownership of the work and its copyright rests with the employer (ie, the fintech company or employer). This does not apply to third-party contractors who do not have an employment contract or relationship with a fintech company (ie, any third party that created a computer program or software will own the copyright). However, fintech companies or individual employers may require that the owner of the copyright assigns on to them the right (the third party will assign its copyright on to the employer fintech company or individual)
A patent for an invention is owned by the inventor.
What immigration schemes are available for fintech businesses to recruit skilled staff from abroad? Are there any special regimes specific to the tech or financial sector?
On 15 February 2017 the Council of Ministers adopted a policy on the employment of staff from third countries by innovative start-up businesses. The programme will continue until February 2019 and applies to founders, managers and support staff of innovative start-up businesses. Therefore, the founders of such businesses are eligible to apply. For a group of individual start-up businesses, which must consist of a maximum of five persons, at least one founder and one senior executive with the right to a stock option plan are eligible to apply for a visa under the new scheme.
What immigration schemes are available for foreign investors and entrepreneurs wishing to invest in or establish a fintech business in your jurisdiction?
The Cyprus Start-up Visa Scheme allows talented entrepreneurs from third countries to (either as individuals or as part of a team) reside and work in Cyprus to establish, operate or develop a start-up with high-growth potential. The scheme’s goal is to:
- create new jobs;
- promote innovation and research;
- develop the business ecosystem; and
- develop the economy more generally.
Applicants and their businesses must meet the following criteria and conditions:
- Investors must have start-up capital of at least €50,000.
- The business plan or business must be innovative, which means that R&D costs must represent at least 10% of operating costs in at least one of the three years before the submission of the application. For new businesses without prior financial activities, innovation will be evaluated based on the submitted business plan.
- The business’s headquarters and effective control and management must take place in Cyprus.