The Cyprus Securities and Exchange Commission (CySEC) on Friday launched a public consultation on a new directive setting out how crypto-asset service providers must submit prudential supervisory information.

The aim of this initiative is to further strengthen oversight under the EU’s MiCAR framework.

Published in June 2023 as a cornerstone of the European Commission’s Digital Finance Strategy, the Markets in Crypto-Assets Regulation (MiCAR) provides a unified EU framework to protect investors and ensure financial stability.

It specifically regulates activities not previously addressed by EU law, including the issuance, custody, and exchange of crypto-assets.

The regulation followed a phased implementation, first applying to issuers of asset-referenced and e-money tokens in June 2024, followed by its application to crypto-asset service providers at the end of December 2024.

CySEC said the consultation paper proposes a new directive on the submission of prudential information by crypto-asset service providers in line with Article 67 of Regulation (EU) 2023/1114 (MiCAR).

The regulator explained that the proposed directive introduces periodic reporting requirements to CySEC, including the submission of prudential information required under MiCAR.

It added that the framework also introduces the submission of financial reports, specifically trial balances, balance sheets and profit and loss statements, alongside audited annual financial statements.

CySEC said the purpose of the new reporting framework is to support its supervisory oversight and to verify that crypto-asset service providers comply with MiCAR prudential requirements.

According to the regulator, the proposed reporting regime is aligned with the prudential reporting framework already applicable to investment firms.

The commission also stated that the submission deadlines set out in the proposal are consistent with existing EU implementing regulations, a move intended to ensure streamlined and timely supervisory reporting.

The consultation applies to crypto-asset service providers authorised by CySEC under Article 63 of MiCAR.

CySEC clarified that the proposed directive does not apply to central securities depositories, Cyprus investment firms, market operators, management companies or alternative investment fund managers that provide crypto-asset services under notification.

These entities, the regulator said, are exempt from the relevant prudential supervision requirements covered by the proposed directive.