In the past "there were some deficiencies or loopholes in the programme. And that's why we have adopted so many steps ... to introduce more effective control mechanisms," President Nicos Anastasiades said in an interview.
Cyprus began offering citizenship in exchange for substantial investment as far back as 2007, but the scheme was stepped up following the Mediterranean island's 2013 economic crisis.
But Nicosia has faced pressure from Brussels to reform the scheme over concerns it may have helped organised crime gangs infiltrate the European Union.
Last month, Qatar-based broadcaster Al Jazeera reported that dozens of those who applied for the so-called "golden passports" were under criminal investigation or international sanctions, or serving prison sentences.
But Anastasiades said Cyprus has been tightening up the rules since 2007, including banning cash payments in 2014.
Under the latest regulations, the government grants a passport in exchange for an investment of 2.5 million euros ($3 million).
Even before Al Jazeera published its story, some 30 people had been referred for investigation to a special committee to see if there were "any violations of our criteria", Anastasiades said.
Following a committee report on Thursday, "it seems that seven out of the 30, they should be deprived of the Cyprus citizenship."
A process has now begun to strip the seven, who are of various nationalities, of the right to Cypriot citizenship.
The country will also re-examine the cases of all roughly 4,000 people who successfully applied for a Cypriot passport under the investment scheme since 2007. But the president said he believed the numbers of violators would be very low.
The tightened rules, including complying with laws on money laundering, greater oversight and due diligence meant the scheme was in line with European directives, he added.