US crypto policy, the EU’s regulatory response, and Cyprus’ role

The global cryptocurrency market is experiencing a seismic shift following the return of Donald Trump to the White House.

While Trump was previously skeptical about digital assets, his new administration has taken a radically different approach, promising to transform the United States into the world’s leading ‘crypto capital’ and ‘Bitcoin superpower.’ This policy reversal has sent shockwaves through financial markets, fueling both optimism and regulatory uncertainty across different jurisdictions.

One of the immediate effects of Trump’s election was the dramatic surge in the value of Bitcoin. On the night of 5 November, 2024, as it became clear that Trump had secured a second term, Bitcoin surpassed $75,000, and by his inauguration day, it had reached an all-time high of $109,000. This increase reflects growing investor confidence in a more crypto-friendly US regulatory environment.

Trump’s administration has already taken decisive steps to reshape the crypto landscape. On January 23, 2025, the President ordered the formation of a dedicated task force to develop a new regulatory framework for digital assets. Additionally, he pledged to remove SEC Chairman Gary Gensler, a move widely supported by the cryptocurrency industry, which had criticized Gensler’s strict enforcement approach. Trump’s push for regulatory clarity and institutional support for crypto assets has led to rapid market expansion, with Bitcoin now accounting for 55% of total crypto market value, while Ethereum approximately representing 10%.

Despite these optimistic market trends, industry experts have warned of potential risks. Many investors, particularly those new to the space, may not fully appreciate the inherent dangers of crypto investments, leaving them vulnerable to fraud and speculation. Some cybersecurity professionals have compared the current state of crypto to the ‘Wild West,’ where regulatory gaps allow bad actors to exploit inexperienced investors.

The EU’s Approach to Crypto Regulation

While the US moves toward a more lenient and growth-driven crypto policy, the European Union (EU) has taken a different path, focusing on establishing a comprehensive regulatory framework. Recognizing the potential risks associated with crypto markets, the EU formally approved the Markets in Crypto-Assets Regulation (MiCAR) on May 16, 2023. This made the EU the first major jurisdiction to implement a structured regulatory framework for cryptocurrencies and related financial services.

MiCAR establishes clear rules for crypto-asset issuers, exchanges, and service providers, aiming to create a harmonized regulatory environment across the 27-member bloc. It introduces licensing and supervision requirements for various types of crypto assets, including exchange tokens like Bitcoin, utility tokens, asset-referenced tokens (ARTs), and electronic-money tokens (EMTs). By enforcing stricter compliance measures, MiCAR seeks to protect investors, enhance market transparency, and mitigate systemic risks.

Additionally, in December 2024, the European Commission’s Directorate-General for Financial Stability, Financial Services, and Capital Markets Union (DG FISMA) published an update on the regulatory implementation of both MiCAR and the Digital Operational Resilience Act (DORA). These two regulations are designed to work in tandem, ensuring that crypto markets remain both innovative and resilient to operational risks.

The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) have been producing technical guidelines for implementing MiCAR. While some regulations have already been published in the EU’s Official Journal, others remain under scrutiny by the European Parliament and the Council. The combination of MiCAR and DORA represents a significant milestone in the EU’s Digital Finance Package strategy, reinforcing its commitment to responsible and sustainable crypto market development.

Cyprus’ Role in the Evolving Crypto Landscape

As a member of the European Union, Cyprus must align its approach to digital assets with EU regulations. While the country has long been a hub for fintech innovation and digital finance, its crypto market is now entering a new phase of regulatory compliance. MiCAR provides a clear structure that Cyprus-based crypto firms and financial service providers must adhere to in order to operate within the European market.

BY aligning with MiCAR and DORA, Cyprus proves that it aligns its regulatory compliance with the EU and enhances its reputation as a responsible and forward-thinking financial center in the Eastern Mediterranean. By implementing a well-structured licensing regime for crypto-asset service providers (CASPs), Cyprus can attract institutional investors and fintech companies that prioritize regulatory clarity and market stability.

Moreover, the emergence of Trump’s crypto-friendly policies in the US presents both opportunities and challenges for Cyprus. On one hand, the rapid expansion of the American crypto market could fuel global investment in digital assets, benefiting fintech firms operating in Cyprus. On the other hand, differences between US and EU regulatory frameworks may lead to increased scrutiny of cross-border transactions and compliance requirements.

Ultimately, Cyprus must balance its position as an innovation-friendly jurisdiction with the need for strong consumer protections and adherence to EU regulations. As the crypto market evolves, the country has the chance to establish itself as a leader in compliant and sustainable digital finance, leveraging the EU’s regulatory framework while remaining competitive in a rapidly changing global financial landscape.

*Nicole K. Phinopoulou, Lawyer, Banking & Financial Services, ESG & Sustainable Finance Expert, Regulatory Compliance, LL. B (Hons), LL.M(UCL), LPC, CISL, University of Cambridge