International Blockchain & Cryptocurrency – Cyprus – Charalambos Papasavvas

Our firm has a dedicated department that focuses specifically on the provision of legal services related to the IT industry, making us pioneers in the legal services industry.

Our dedicated team of lawyers specialise in financial technology and the legal issues arising in this specific sector, and possess the expertise required to establish and grow a business in Cyprus.

More specifically, our expert team focuses on business models that involve innovation and innovative technology, startups, blockchain and cryptocurrencies, etc.

In addition, we handle venture capital funds or AIFs that seek to enter the field of innovation.

In an ever-changing regulatory environment, our teams of experts can help you with the following:

• Legal review and structuring of coin and token offerings (ICOs, IEOs, STOs);
• Regulatory compliance consulting for financial technology (FinTech) businesses;
• Legal advice and regulatory compliance advice and support in relation to cryptocurrency projects;
• Legal support for modern finance and tech-related projects (e-wallets and peer-to-peer (P2P) lending);
• Accounting and taxation services in the financial services and FinTech fields, with a specific focus on cryptocurrencies and tokens;
• Business planning and strategy formulation for companies, whether startups or not, seeking to enter and invest in the blockchain and AI market.

From a business perspective, it is helpful to think of blockchain technology as a type of next-generation business process improvement software. Collaborative technology, such as blockchain, proclaims the ability to improve the business processes that occur between companies, radically lowering the “cost of trust”. For this reason, it may offer significantly higher returns for each investment dollar spent than most traditional internal investments.

As an initial overview, we begin by demystifying cryptocurrency and digital assets. We provide an introduction to the mechanics of this world: how it functions, the various categories of assets, and where the future of this space could lead. For a deeper understanding, we recommend the following resources:

• “Digital Assets & Crypto: Papasavvas & Liskavidou LLC’s open source of knowledge on all things crypto”. Papasavvas & Liskavidou LLC Digital Asset Predictions provides our thoughts on where the industry is heading to help business leaders craft the strategy that this promising but volatile space requires – one that matches innovation with trust;

• “Why is the crypto custody important for financial institutions?” A discussion on how custody is the foundation for any business venture into digital assets;

• For an overview into Web3, we recommend “Demystifying Web3”, which discusses what business leaders should know, its potential, and which no-regrets decisions you can make to prepare;

• “Five ways to deepen customer engagement and loyalty with Web3”, which discusses how loyalty programmes can be improved using Web3 technology;

• “How to build a sustainable NFT strategy”, which discusses how an NFT strategy can drive revenue and growth by building a foundation for the future;

• For a deeper understanding of blockchain technology, we suggest “Embracing sustainable innovation: understanding the environmental impacts of blockchain technology”, which discusses in detail how blockchain can be used to improve sustainability strategies.

In September 2023, an existing client of our firm – a multinational digital communications company – became aware of an attacker within their network. Their internal investigation showed that the attacker conducted a series of sophisticated voice phishing attacks to access an employee’s Google account. Since the employee’s credentials were synchronised in a browser, the attacker could easily access Cisco’s internal systems.

Our professional advice is that you can secure your organisation’s privileged accounts by enabling MFA and requiring manual approval of access requests for the most critical assets.

To meet regulatory compliance and standards effectively, it is essential to follow the following steps, incorporating QMS-related keywords:

1. Implement a robust quality management system:
Automation of processes through an electronic Quality Management System (eQMS) facilitates adherence to regulations, ISO standards, and enhances manufacturing efficiency, product quality and speed to market.

2. Document control:
Strict adherence to documentation requirements, including changes, specifications, plans, procedures and files, is crucial. Any oversight in the documentation process can have severe consequences for the company’s compliance.

3. Utilise a comprehensive training software system:
Continuous training is vital for quality improvement and regulatory compliance. An automated training system reduces audit time and findings, mitigates the risk of product recalls and ensures compliance with FDA and ISO standards.

4. Prepare for regulatory audits:
Being prepared for audits is critical to the success of the company. Implementing an audit management software system streamlines audit-related tasks, facilitates accurate reporting and provides real-time views of the audit process for management.

5. Operate in a validated environment:
FDA-regulated companies must provide documented evidence of compliance. Validation – including installation qualification (IQ), operational qualification (OQ) and performance qualification (PQ) – can be made more manageable by leveraging an automated system with Transfer Operational Qualification (TOQ) capabilities. TOQ allows companies to demonstrate a validated environment with support documentation.

6. Appoint a compliance officer:
The role of a compliance officer (CCO) is crucial in navigating the evolving regulatory landscape and making informed compliance decisions. The CCO champions corporate integrity, accountability and ethics within the organisation.

7. Establish and maintain policies and procedures:
It is important to develop comprehensive policies and procedures that address specific compliance areas identified during audits. Regular review and updates of these policies are necessary to align with changing regulatory requirements. Effective policy management includes tracking employee acknowledgment and understanding of policies to reduce liability.

By following these steps, businesses can create an effective regulatory compliance programme that safeguards resources and reputation, as well as both internal and external stakeholders.

Blockchain helps in speedy transactions and eliminates any sort of need for intermediaries with the help of smart contracts. These are automated software-encoded agreements that execute all the required stipulations of a contract automatically once all the prerequisite terms and conditions have been met. Smart contracts in blockchain work by following simple conditional statements that are written into the blockchain code; a combined network of computers executes these statements and actions once the conditions are satisfied completely. For example, if you are issuing a ticket using blockchain, then the smart contracts will execute the same once your set conditions are met and verified. Once the transaction has been completed, the blockchain will update itself – meaning that only the parties who have permission can view the results of the transaction.

In construction contracts, the consideration commonly takes the form of money paid in a currency that is specified under the contract. For instance, Sub-Clause 14.15 [Currencies of Payment] of FIDIC Red Book 2017 stipulates that “[the] Contract Price shall be paid in the currency or currencies named in the Contract Data”.

However, given the recent shift from physical banknotes (or coins) towards digital payment solutions, interest in digital currencies such as cryptocurrencies has grown, with the most popular being Bitcoin (aka “BTC”).

Notwithstanding the limited usage of digital currencies, one would wonder whether a construction contract price can be paid through Bitcoin instead of the common fiat currencies (e.g., dollar, euro, yen, etc.).

To determine if Bitcoin can be construed as a valid consideration in construction contracts, it is essential to explore whether Bitcoin carries (i) a real economic value, and (ii) a legal value.

Blockchain game development is a process that involves an end-to-end approach in developing hi-tech games that are enriched with metaverse and Web3 elements, and offer several differing types of services in the fields of design, coding, testing, deployment, etc. Depending on the specific ways in which these games leverage blockchain technology, they are also sometimes referred to as crypto games, NFT games, Web3 games or metaverse games. Polygon and Solana are two examples of the differing blockchains used in game development.

Web3.js, as the name suggests, is a JavaScript library that allows blockchain developers to interact with the Ethereum blockchain through the browser itself. For developers who wish to build dApps that can be used in a web browser, Web3.js remains a popular and frequently used choice.

Blockchain technology enables FinTech startups to innovate by hiring FinTech software developers. It unlocks new possibilities, such as digital currencies and smart contracts, fostering disruptive innovation. This drives advancements in finance, while enhancing transparency in capital markets for future growth.

Considering the potential features of blockchain technology, several innovative technologies have been developed. Among these, DeFi and the metaverse are two important advancements that were proposed approximately five years ago, and are still regarded as state-of-the-art technologies. Traditional businesses rely on centralised systems to manage operations and transactions. Such businesses typically have a hierarchical authority structure for decision-making and require intermediaries, such as banks or other financial institutions, to facilitate transactions. In contrast, blockchain-based businesses operate on decentralised systems that use distributed ledger technology to record transactions and manage operations.

The key differences between traditional businesses and blockchain-based ones are described as follows.

• Centralisation vs Decentralisation: Traditional businesses rely on a centralised authority (e.g., a company or government) to manage their operations and transactions. Blockchain-based businesses, however, operate on a decentralised network, where no single entity has control over the system;

• Intermediaries vs Direct transactions: Traditional businesses require intermediaries (e.g., banks, brokers or lawyers) to facilitate transactions. In contrast, blockchain-based businesses allow for direct, peer-to-peer transactions without intermediaries – thereby reducing transaction costs and speeding up transactions;

• Transparency vs Immutability: Blockchain-based businesses offer transparency and immutability features that traditional businesses lack. Transactions recorded on a blockchain are transparent and accessible to all participants. Moreover, once recorded, transactions cannot be altered or deleted;

• Smart contracts: Blockchain-based businesses can use smart contracts to automate processes and enforce agreements without the need for intermediaries, which can improve efficiency and reduce costs.

Cryptocurrency has often been synonymous with a lack of regulation. However, this is rapidly starting to change, with governments around the world now considering rules for digital currencies.

Regulation for crypto assets has been under consideration for some time; however, there was a heightened sense of urgency after a series of bank collapses that were tied to crypto asset activities.

The incidents seem to have prompted moves to propose accounting and reporting guidance for crypto assets, as Reuters reported last year. In the EU, rules were being devised before the bankruptcy of crypto exchange FTX.

Copyright in creative output does not pass automatically on the purchase of an NFT under the majority of most standard forms of smart contract, including the most common – the Ethereum standard ERC-721. Again, a parallel can be drawn with fine art: when an art collector purchases an original Banksy, the art collector does not obtain the right to reproduce the artwork and sell it to the general public – that right remains with the creator, and is subject to the usual limitations that apply to copyright laws.

In this instance, reproduction of an NFT would constitute copyright infringement, and Banksy could pursue a claim. In order to transfer copyright in a work from the copyright owner, a written assignment of the copyright is required. This must expressly form part of the smart contract, or be contained in a separate deed of assignment outside of the smart contract. Consequently, any use of the underlying digital asset that involves copying or commercialisation will likely form copyright infringement if the consent of the copyright holder has not been obtained. As such, the sale and resale of an NFT does not automatically transfer the copyright in the underlying digital asset – unless a copyright assignment forms part of the smart contract.

ADR (negotiation cases).