George Karatzias: Cyprus is a particularly attractive destination for EMIs and PIs

"The market for Electronic Money Institutions (EMIs) and Payment Institutions (PIs) is experiencing rapid growth, both in Europe and in Cyprus," stated George Karatzias, Executive Board Member of the Central Bank of Cyprus (CBC), during his presentation at the ACEMPI Afternoon Event in Nicosia.

Strengthening supervision and transparency, creating a balanced regulatory framework, and supporting the sector’s sustainable development are among the CBC's top priorities at a time when digital payments are skyrocketing.

According to Karatzias, Cyprus has evolved into a particularly attractive destination for the establishment and operation of EMIs and PIs, ranking fourth in the EU in terms of the number of licensed EMIs.

With 12 Payment Institutions and 28 Electronic Money Institutions currently operating in the country, the market continues to attract new players, while the overwhelming majority of revenues come from a few, but highly active, companies in the sector, he noted.

Karatzias emphasised that the EMI and PI market in Cyprus saw rapid growth from 2019 to 2023, with transaction volumes increasing significantly.

This development, he said, is not accidental but the result of a combination of regulatory stability, a competitive tax environment, and a strong fintech ecosystem.

Nevertheless, the concentration of the market in a few large firms creates challenges, which the CBC aims to address through strategic interventions.

The key pillars of the CBC’s regulatory strategy

The CBC’s regulatory strategy for EMIs and PIs focuses on three main pillars:

Strengthening supervision and transparency

To maintain the stability of the financial system, the CBC is placing greater emphasis on closely monitoring the activities of EMIs and PIs. This includes stricter compliance checks and enhanced regulatory requirements for transaction security and anti-money laundering measures.

Creating a balanced regulatory framework

The Central Bank aims to maintain an environment that fosters innovation without compromising stability. Karatzias highlighted the importance of adapting the framework to current technological developments in order to support the growth of the fintech sector in Cyprus.

Supporting the sector’s sustainable growth

The CBC seeks to create a favourable business environment that will foster the long-term growth of the payments and electronic money sector. This includes attracting new investment, collaborating with international regulatory bodies, and strengthening user trust in digital payments.

Prospects and challenges

Cyprus stands at a pivotal point in the future development of its financial sector. The growing importance of digital payments and fintech solutions demands a delicate balance between innovation and regulation.

Industry players are called upon to comply with new regulatory requirements while also seizing the opportunities offered by this rapidly expanding market.

As Karatzias noted, “The success of EMIs and PIs in Cyprus depends on their ability to adapt to changing market conditions and regulatory demands”.

Businesses that invest in security, compliance, and technological innovation will gain a competitive edge in an ever-evolving environment.

With the Central Bank’s strategy focused on enhancing transparency, supervision, and sustainable growth, Cyprus has the opportunity to establish itself as one of Europe’s leading fintech hubs, as highlighted by the Executive Board Member of the CBC.

The coming period, he concluded, will be critical in determining how the country navigates the challenges and capitalises on the opportunities in the fast-developing digital payments sector.