CySEC to join EU review of crypto custody firms’ digital resilience

Nicosia, Cyprus. The Cyprus Securities and Exchange Commission (CySEC) will participate in a European-wide supervisory exercise assessing the digital operational resilience of crypto asset service providers offering custody services. Inspections are due to begin in the second half of 2026.

EU supervisory exercise

The initiative follows the launch of the 2026 Common Supervisory Action by the European Securities and Markets Authority (ESMA), in cooperation with national competent authorities across the European Union.

According to a CySEC circular, the exercise will assess the digital operational resilience frameworks developed by authorised crypto asset service providers in relation to custody activities.

Areas under review

The review will examine risks associated with distributed ledger technology, which underpins many crypto assets, and will focus on how firms protect digital assets and maintain secure operations.

CySEC said the assessment will cover governance arrangements, the management of digital keys and storage systems, transaction controls, incident detection and response procedures, smart contract-related risks, and dependence on third-party service providers.

Cyprus inspections

National competent authorities will conduct the review using a risk-based sample of authorised crypto asset service providers. The supervisory exercise will run from the second half of 2026 until the first half of 2027.

In Cyprus, CySEC plans to carry out on-site inspections and desk-based reviews involving a selected group of crypto firms.

Only firms that have already been authorised and licensed to provide custody services will be included in the sample, CySEC said, to ensure consistency across participating authorities.

Supervisory priorities

CySEC said the initiative reflects ESMA’s risk-based supervisory priorities, which identify digital operational resilience and crypto asset service providers as areas requiring closer oversight.

ESMA developed the Common Supervisory Action to improve supervisory consistency across the European Union in a rapidly evolving financial market segment, the regulator added.