Capital markets will continue to be influenced by the demands of the digital transition, the rise of artificial intelligence, as well as new regulatory requirements, according to CySEC chairman George Theocharides.
“The increasing institutional and regulatory demands, the digital transition, the European Central Bank’s monetary policy, and sustainable investments will continue to be key factors shaping the capital markets, the investment sector, and investment funds in 2025 in Cyprus and the broader European region,” Theocharides said on Monday.
He added that “international economic conditions and geopolitical risks will present significant challenges to the markets”.
Citing the European Commission’s autumn macroeconomic forecasts, he mentioned that Cyprus’ economic growth rate in 2025 is expected to reach 2.8 per cent, while inflation is projected to slow to 2 per cent.
He also said that “wage increases are expected to remain high, boosting household purchasing power and consumption”.
Moreover, tourism and financial services “will continue to contribute positively to the growth of the Cypriot economy, as they did in 2024”.
“The capital market sector in Cyprus is stabilising, with the number of entities supervised by the Cyprus Securities and Exchange Commission (CySEC) reaching 825 in November,” Theocharides said.
“Approximately 70 new applications of various types are under review for licensing,” he added.
The CySEC chairman stressed that the investment sector in Cyprus and Europe overall is expected to face numerous challenges and opportunities in 2025.
On the legislative front, the implementation of the Markets in Crypto-Assets Regulation (MiCA) from January will enhance the licensing and provision of services by Crypto Asset Service Providers, alongside investor protection across Europe.
“A number of companies have already expressed interest in obtaining relevant licences from CySEC,” he said.
Additionally, the Digital Operational Resilience Act (DORA), which establishes uniform requirements for network and information system security supporting the business processes of financial entities, will also come into full effect in January.
“To this end, CySEC, like other European regulators, is intensively preparing for its implementation, including the collection of cybersecurity data from supervised entities,” Theocharides stated.
The CySEC chairman also explained that the digital transformation of the financial sector in Cyprus and the European Union is expected to continue in 2025.
He also mentioned that artificial intelligence will be “at the forefront of this effort”.
“Digitalisation and new financial technologies (fintech) offer opportunities for innovation and growth,” Theocharides said.
He also stated that “Cyprus could further establish itself as a fintech hub, attracting a new, specialised workforce focused on technology and innovation”.
“CySEC remains committed to the healthy development of the capital market through prudential supervision, leveraging specialised systems to keep pace with the sector’s rapid digitalisation and ensuring investor protection,” he added.
Furthermore, Theocharides pointed out that another area poised for further growth is sustainable investments, commonly referred to by the term ESG (environmental, social, governance).
“Alternative Investment Funds and their managers, in line with relevant European regulations, are expected to develop green bonds, ESG equities, and other investment products incorporating sustainable practices,” he said.
He mentioned that “the shift towards sustainable investments also poses challenges for the investment strategies and portfolios of organisations”.
“Investors must seek greater transparency about these investments, while supervisory authorities must monitor the authenticity of sustainability claims to avoid “greenwashing” – cases where investments are misleadingly promoted as sustainable,” he added.
Theocharides also commented on the ongoing threat stemming from geopolitical challenges.
“The war in Ukraine, tensions in the Eastern Mediterranean, and economic uncertainty due to interest rates and inflationary pressures will influence market trajectories and the investment strategies of institutional and alternative investment organisations,” he said.
“The prices of natural gas and oil, susceptible to geopolitical and economic developments, will remain volatile, directly impacting European and global markets,” he added.
“Overall, despite geopolitical challenges in the region, the Cypriot economy is expected to grow at a positive pace in 2025,” Theocharides explained.
“Investments in green energy and technology are set to increase further, while the capital market sector in Cyprus will continue to develop steadily throughout the year,” the CySEC chairman concluded.