Cyprus:

Becoming A Crypto-Asset Service Provider In Cyprus


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In June 2021, following a recent implementation and enactment of
the 5th AML Directive into national legislation, the Cyprus
Securities and Exchange Commission (“CySEC”) has
introduced, via the issuance of Directive 269/2021, the creation of
a Crypto-Asset Service Providers (“CASP”) Registry, its
operation, registration and supervision conditions.

This development requires for interested applicants to apply to
CySEC, being the supervisory body, for registration to the registry
in order to be able to provide, among others, crypto exchange
services within a regulatory framework, which has been untouched
for many years.

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:

  • Incorporate an entity in Cyprus. The entity must have two
    executive and two non-executive directors and the majority of them
    (3 out 4) must be tax residents of Cyprus. The directors must be
    approved by CySEC upon assessment of their knowledge and experience
    in the field and must be evaluated whether they satisfy the
    “fit and proper” test;

  • 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;

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

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

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

Type of License, Capital Requirements and Time-frame

Currently, there are two types of licenses based on different
capital requirements;

A. Type A license (EUR125.000 initial capital
requirement)

Under this license the service provider will be able to provide
the below services:

  1. Reception & Transmission;

  2. Execution of orders on behalf of clients;

  3. Portfolio management;

  4. Investment advice;

  5. Exchange between cryptocurrencies and fiat money;

  6. Cryptocurrency asset exchange;

  7. Participation and / or provision of financial services on
    distribution, supply and / or sale of cryptocurrencies, including
    the initial offering;

  8. Placing of crypto-assets without a firm commitment basis

B. Type B license (EUR150.000 initial capital
requirement)

Under this license the service provider will be able to provide
the services allowed under the Type A license above along with:

  1. management, transfer, retention, and / or safekeeping,
    including the depositary of cryptocurrency assets or cryptographic
    keys or means that allow control over cryptocurrencies;

  2. Underwriting and/or placing of crypto-assets on a firm
    commitment basis;

  3. operation of a multilateral trading facility in which
    interested parties for buying and selling crypto assets may
    interact in a way that results in a transaction

Fees and Subscriptions:

The applicants are required to pay €10,000 upon the
submission of their application which may not be refunded if the
application is rejected. In the register, the yearly renewal of the
registrations amounts to €5,000.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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