Cyprus Eyes On-Site Audits for Crypto Custodians
Cyprus Targets On-Site Audits for Crypto Custodians
Cyprus is moving to introduce on-site audits for crypto custodians, signaling a more hands-on approach to oversight of firms that hold digital assets on behalf of customers.
The shift highlights an effort to strengthen supervision beyond document-based reviews, with on-the-ground inspections typically used to verify whether internal controls and operational practices match what firms report to regulators.
Crypto custody has become a focal point for regulators globally because custodians sit at a critical intersection of security and consumer protection. When customers do not control their own private keys, they rely on a service provider’s governance, risk management, and asset-safeguarding processes.
By targeting on-site audits, Cyprus is aligning more closely with regulatory expectations seen in traditional financial services, where inspections are commonly used to evaluate:
- Safekeeping arrangements and separation of client assets
- Security controls and access management around wallets and keys
- Operational resilience, including incident response and business continuity
- Compliance procedures and internal oversight
The development adds to the broader European trend toward tighter supervision of crypto service providers, as regulators increasingly focus on the practical enforcement of standards, not just rule-making.
