When ethnic groups negotiate self-government arrangements, ‘ethnic sovereignty’ lies boldly at the heart of their security considerations. The constitutional nature of self-determination and the extent of territorial control can determine the degree of ethno-territorial sovereignty attributed to groups. However, in competitive contexts influenced by fear and mistrust, groups interpret these pillar elements in ways that increase their own sense of security. The present study argues that legal and political positions on sovereignty in Cyprus are largely built around the competitive security assumptions held by the Greek and Turkish Cypriot leaderships, and explains how the divergent viewpoints and understandings of sovereignty reflect the underlying security fears and suspicion of parties. The analysis finds that the two ethnic leaderships in Cyprus have sought to accumulate a distinct ‘sovereignty capital’ in an effort to safeguard their own and overpower each other’s perceived security intentions in the event of federal collapse, making thus the attainment of settlement in Cyprus particularly elusive.