Crypto Asset Services Provider (“CASP”) in Cyprus.

Crypto Asset Services Provider (“CASP”) in Cyprus.

Introduction

If you are a Crypto Asset Services Provider (“CASP”), within the meaning of the Prevention and Suppression of Money Laundering and Terrorist Financing Law (“AML/CFT Law”), that provides services in or from Cyprus, you must formally register with the Cyprus Securities and Exchange Commission (“CySEC”).

A Crypto asset service provider, as defined under 2(1) of the AML Law.

“Provider of Services relating to Crypto Assets” is defined as a person who provides or carries out one or more of the following services or activities to another person or on behalf of another person, which do not fall within the services or activities of the liable entities referred to in paragraphs (a) to (i) of Article 2A:

• Exchange between cryptocurrencies and fiat money;

• Exchange between crypto assets;

• The management, transfer, retention, and / or safekeeping, including custody, of cryptocurrencies or cryptographic keys or means enabling control over cryptocurrencies;

• Offering and / or selling cryptocurrencies, including the initial public offering; and

• Participation in and / or provision of financial services related to the distribution, offering and / or sale of cryptocurrencies, including the initial public offering.

• As such, a Crypto Asset Services Provider (CASP), within the meaning of the Prevention and Suppression of Money Laundering and Terrorist Financing Law (AML/CFT Law), that provides services in or from Cyprus, must formally register with the Cyprus Securities and Exchange Commission (CySEC).

If you are a CASP established in the EEA and registered with one or more EEA National Competent Authorities for AML/CFT purposes in relation to all services or activities undertaken or intended to be undertaken in Cyprus (i.e. involving Cypriot residents, including incorporated or unincorporated entities based in Cyprus), you must submit a notification, providing evidence in relation to your valid registration for each service or activity. Where these services or activities are not covered by the framework that governs your registration for AML/CFT purposes, you should submit an application to be registered as a CASP with CySEC.

New businesses must register with CySEC before commencing their operations in or from Cyprus.

Existing businesses that demonstrate a material existing crypto-asset activity will need to submit an application before the end of October 2021 and be fully compliant with the AML/CFT Law and the Directives issued pursuant to the AML/CFT Law.

Crypto-assets as defined under the AML Law.

Crypto-assets are defined as a digital representation of value that was not issued or guaranteed by a central bank or public authority, which are not necessarily attached to a legally established currency, and do not possess a legal status of currency or money, but are accepted by persons as a means of exchange or investment and which can be transferred, stored, or traded electronically and that is not:-

• Fiat currency;

• Electronic money;

• Financial instruments as defined in the Law on the Provision of Investment Services and Activities and Regulated Markets.

Type of License, Capital Requirements and Time Frame

There are three types of licenses based on different capital requirements;

A. Class 1 License – Crypto Asset Services Provider (CASP) that provide investment advice (EUR50.000 initial capital requirement)

B. Class 2 License – (EUR125.000 initial capital requirement)

Under this license the service provider will be able to provide services referred to in Class 1 and/or any of the below services:

• Reception and transmission of client orders.

• Execution of orders on behalf of clients.

• Exchange between crypto-assets and fiat currency.

• Exchange between crypto-assets.

• Participation and/or provision of financial services related to the distribution, offering and/or sale of crypto-assets, including the initial offering.

• Placement of crypto-assets without firm commitment

• Portfolio management.

C. Class 3 License – (EUR150.000 initial capital requirement)

Under this license the service provider will be able to provide the services allowed under the Class 1 & Class 2 licenses in addition to:

• Administration, transfer of ownership, transfer of site, holding, and/or safekeeping, including custody, of crypto-assets or cryptographic keys or means enabling control over crypto-assets.

• Underwriting and/or placement of crypto-assets with firm commitment.

• Operation of a multilateral system, which brings together multiple third-party buying and selling interests in crypto-assets in a way that results in a transaction.

Application Procedure

• All corporate documents of the Company (incorporation certificate, certificate of directors/secretary, shareholders, address, Memorandum & Articles, etc) together with the application form.

• The time frame for the preparation of the application and supporting documents is usually 1-2 months, depending on the availability of the required documents.

• Together with the above documents, an internal procedures manual, anti money laundering manual and know your client procedures must be filed with the application.

• The application and all supporting documents are filed with CySEC.

• CySEC has up to 6 months from the date of submission to either approve or deny the application.

Requirements

The applicant in order to apply and successfully be approved by CySEC, as a licensed crypto-asset service provider must fulfil the conditions mentioned below:

1. Incorporate an entity in Cyprus of which the Board of Directors has at least 4 members with at least 2 being executive directors. The directors must be approved by CySEC on their knowledge and experience in the field and must satisfy the fit and proper test of CySEC;

2. Satisfy the legal substance requirement: A fully operational office must be established within the Republic and local staff will need to be hired on a full-time basis in order to satisfy the key functions of the company;

3. Present adequate policies and procedures in compliance with the Law and Directive for the Prevention and Suppression of Money Laundering and Terrorist Financing;

4. Present adequate internal control mechanisms for the smooth operation and functioning of the company;

5. Consummate governance arrangements, are in place, with reference lines that are transparent and are clearly identified and defined;

CySEC Application Fees

Application for the granting of a Crypto Asset Services Provider (CASP) authorisation costs ten thousand euros (€10,000) for the application and five thousand euros (€5,000) for the annual renewal of the license.

In the event that the application is declined, the license fee is not refundable.

For more information about the process please contact us by sending an email here.