The Cyprus capital market is poised for steady growth in 2026, driven by regulatory reform, technological innovation and stronger supervision, according to Panikkos Vakkou, Vice-Chairman of the Cyprus Securities and Exchange Commission (CySEC).

In an article first published by Stockwatch, Vakkou argued that the Cypriot capital market is entering a critical transition phase shaped by European and international developments, rapid technological advances and persistent geopolitical and macroeconomic uncertainty.

He explained that these forces “are increasing both the demands placed on market participants and the complexity of supervision for regulators across Europe”.

According to Vakkou, “one of the most pressing challenges for the Cypriot capital market is the implementation of a more demanding institutional and regulatory framework”.

He pointed specifically to revisions of MiFID II and MiFIR, AIFMD II and UCITS, as well as the introduction of MiCA and DORA, which he says will enhance transparency, strengthen investor protection and improve digital resilience.

Vakkou also highlighted new thematic areas such as artificial intelligence, FinFluencers and copy trading, stressing that these emerging practices require strict supervision and specialised expertise.

He described “technology as both a catalyst for growth and a source of risk”, warning that the rise of technology-based investment products, many of them high risk, makes the upgrading of supervisory frameworks essential.

Vakkou further pointed out that “increased digitalisation has led to a rise in investor fraud”, underlining the need not only for stricter oversight but also for continuous public education.

In this context, he stated that the Cyprus Securities and Exchange Commission is rolling out its own financial literacy initiatives while also cooperating with ESMA and other European supervisory authorities on joint awareness campaigns.

Turning to the broader environment, Vakkou said that “geopolitical tensions, inflationary pressures and potential interest rate changes are likely to continue shaping investor sentiment in 2026”, with energy prices remaining particularly vulnerable and influential.

He also stressed that at a pan-European level, the healthy development of sustainable investments and the fight against greenwashing have become non-negotiable, requiring transparency, reliable data and meaningful integration of ESG criteria.

Despite these challenges, Vakkou maintains that prospects for the Cypriot capital market remain positive, supported by steady economic growth driven by services, technology and energy.

He concluded that “by investing in human capital, cybersecurity and digital resilience, and by leveraging technologies such as artificial intelligence and blockchain, the commission is reinforcing investor protection and market confidence for the benefit of the Cypriot economy”.