Lessons for EMIs and Regulated Entities from Administrative Court Judgment No. 975/2020 — The Courts Confirm the Supervisory Approach in Cyprus

Regulatory Non-Compliance as a Ground for Licence Cancellation

Cyprus regulatory law is clear in principle but often underestimated in practice: a regulated licence is not a vested right but a conditional administrative authorisation, subject to continuous compliance with statutory and regulatory requirements. This position was reaffirmed in Administrative Court Judgment No. 975/2020, in which the Court upheld the decision of the Central Bank of Cyprus to revoke the Electronic Money Institution (EMI) licence of an entity referred to in the proceedings as ‘W Ltd’.

The judgment, issued on 29/12/2025, is of particular importance for EMIs and payment institutions, but its reasoning extends well beyond the EMI sector and is equally relevant to entities supervised by the Cyprus Securities and Exchange Commission (CySEC). It confirms the courts’ consistent respect for supervisory authorities where regulatory obligations are not demonstrably fulfilled.

The Regulatory Context

EMIs operating in Cyprus are subject to the Electronic Money Law and the broader EU regulatory framework under PSD2. These obligations are not limited to the licensing stage. On the contrary, they are ongoing, dynamic and supervisory in nature, encompassing capital adequacy, operational substance, reporting obligations, governance arrangements and effective use of the licence.

In the case under consideration, the Central Bank concluded that EMI firm ‘W Ltd’ no longer met these ongoing conditions. The licence was therefore revoked. The company challenged the decision, alleging, inter alia, disproportionality, violation of procedural rights and economic harm.

The Court rejected the challenge in its entirety.

The Court’s Legal Reasoning

The Administrative Court’s reasoning is particularly instructive for regulated entities. The Court accepted that the Central Bank enjoys broad supervisory discretion when assessing whether an EMI continues to satisfy the conditions under which its licence was granted. That discretion is not exercised arbitrarily but in the context of safeguarding financial stability, consumer protection and the integrity of the payment system.

The Court emphasised that the burden of proof lies with the regulated entity. It is not sufficient for an EMI to assert future plans, transitional inactivity or anticipated compliance. The regulator is entitled to require objective, current and verifiable evidence of compliance, particularly in relation to minimum capital requirements and actual use of the licence.

Crucially, the Court accepted the regulator’s position that a licence which is not genuinely and continuously exercised ceases to serve its regulatory purpose. A dormant or non-utilised licence is not a neutral state; it is a compliance failure in itself.

Reputational and Economic Harm: A Legally Irrelevant Argument

One of the most significant aspects of the judgment is the Court’s dismissal of general claims of reputational and commercial damage. The Court held that such allegations, without specific and legally cognisable proof of unlawful conduct by the regulator, do not establish a ground for annulment.

This finding is highly relevant for regulated entities contemplating litigation against supervisory decisions. The courts will not balance regulatory enforcement against business inconvenience. The decisive question is not whether the decision negatively affects the company, but whether the regulator acted within the law and its supervisory mandate.

Implications for EMIs and CySEC-Regulated Entities

Although the judgment concerns an EMI, the principles articulated by the Court apply equally to CySEC-regulated entities, including CIFs, fund managers, crypto-asset service providers and other supervised structures. Across both regulators, the legal position is consistent: licensing is conditional, continuously assessed and revocable.

Regulators are not required to wait for consumer losses, systemic risk or market failure before acting. Preventive intervention, including licence revocation, is lawful where compliance gaps are identified.

A Misconception with Serious Consequences

A recurring misconception among regulated entities is that compliance deficiencies can be remedied “in due course” or that temporary inactivity will be tolerated. The judgment in Case No. 975/2020 demonstrates that this approach is legally unsustainable.

From a regulatory and judicial perspective, non-compliance is not a preliminary warning stage. It is a substantive failure that may justify the immediate withdrawal of authorisation.

Cyprus as a Jurisdiction — Strict but Credible

Far from undermining Cyprus as a regulatory centre, judgments of this nature reinforce its credibility within the EU. They confirm that supervisory authorities act decisively and that courts support enforcement where it is legally grounded. For compliant EMIs and regulated entities, this creates a stable and reputable operating environment.

AGPLAW’s Perspective

AGPLAW regularly advises EMIs, fintech companies and CySEC-regulated entities on licensing, ongoing compliance, supervisory engagement and regulatory risk management. The ‘W Ltd’ judgment illustrates the importance of continuous legal and regulatory oversight, not only at the point of authorisation but throughout the life of the licence.

In the current regulatory climate, early identification and remediation of compliance risks is essential. Once supervisory confidence is lost, legal remedies are limited.

The message from the Administrative Court is clear and unequivocal: A regulated licence exists only for as long as the regulated entity continuously proves its entitlement to hold it. For EMIs and other regulated entities in Cyprus, compliance is not an administrative formality but rather the legal foundation of the business itself.

The information provided by AGPLAW | A.G. Paphitis & Co. LLC is for general informational purposes only and should not be construed as professional or formal legal advice. While every effort has been made to ensure the accuracy and reliability of the information contained herein, no representation or warranty is given. In no event will the author or any related parties be liable for any loss arising from reliance on this article.