Cyprus has become an increasingly attractive FinTech Hub, as the, Financial services remain the fastest growing sector of the Cypriot economy. Firstly, Cyprus has a strong and sophisticated financial services center with a full legal framework. The Cyprus Securities and Exchange Commission (CySEC) governs activities and ensures financial regulations and operations comply with the European MiFID financial harmonized law.
The strategic geographical location of Cyprus (close to Europe, Africa and the Middle East) as well as the country’s developed free market economy, the lowest corporate tax rate in Europe (12.5%), advanced telecommunication network, professional human resources and a high standard of living are also attractive for anyone looking to set up a FinTech company.
This goes a long way to explaining why there is already an impressive increase in start-ups in Cyprus alone offering services such as real-time investment portfolio securitization and advanced performance analytics as well as automated order processing and investment execution. Fintech is all about streamlining and improving traditional financial services to make them safer, more secure and as efficient as possible.
Foreign exchange companies (Forex) and international money transfer businesses are helping to pioneer the FinTech movement in the Cyprus by recognizing the island’s qualities as a global specialist center for FX. Companies setting up base here include electronic money institutions including prime brokerages, major platform providers, liquidity management companies, specialist professional services firms, Regtech companies and reporting companies. Other FinTech companies include authorized credit institutions, investment firms, insurers and other payment institutions.
FinTech Climate in Cyprus
Currently, Cyprus’s climate is friendly as the government provides incentives for all kinds of startups and an Innovation Hub has been established for this type of businesses. The country is becoming a leader for start-ups due to its flourishing economic environment.
Recently, Cyprus government has launched “programs to enhance the local business ecosystem” by providing incentives to local and foreign start-ups that want to operate in Cyprus.
One of the most important programs was made by the Ministry of Finance along with the Unit for Administrative Reform, which aims to give attractive incentives, like tax exemptions to investors of innovative start-ups.
Tax incentives “are not specifically provided to FinTech businesses”. However, these could benefit from programs that provide incentives in the tax area, especially if they are start-ups.
In addition, new FinTech businesses and start-ups are able to “obtain funding through various financing means” in this country. Such means include loans, venture capital, angel investors, among others.
The Cyprus Securities and Exchange Commission (CySEC) has established an Innovation Hub to help “FinTech and RegTech developments that rely on distributed ledger technology (DLT)”. One of the functions of this program is to facilitate communication between FinTech representatives and regulators, as well as to help improve the regulatory climate for both businesses and entrepreneurs.
With the Innovation Hub, Cyprus will compete with other European countries to attract the best FinTech innovators.
In conclusion, the following are the reasons Cyprus is a destination for FinTech Companies:
- Cyprus is a well established international financial and business centre of excellence due to its unique combination of favourable factors and comparative advantages which makes it extremely attractive for business as well as for its standard of living. As a result, FinTech Companies have cropped up.
- Cyprus has a sophisticated and strong financial services sector with important banking, investment and financial players, which makes it attractive to FinTech businesses.
- An advanced telecoms network and infrastructure.
- Unparalleled tax incentives in line with the European Union (e.g. for start-ups and small innovative companies, to FinTech businesses and entrepreneurs to protect and commercially exploit their IP rights)
- A long list of double tax treaties and a special holding company regime.
- A strategic geographical location at the hub of Europe, the Middle East and Africa.