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Crypto Asset Service Provider (CASP) in Cyprus

A Crypto Asset Service Provider (CASP) is a person who provides certain services regarding crypto assets to another person. These services can be an exchange between crypto assets, exchange between crypto assets and fiat currencies, the management and safekeeping of crypto assets, their sale, and so on. Under section 2 of the relevant Cyprus law, see below, a person can be natural (an individual) or legal (a company).

The relevant law is the Prevention and Suppression of Money Laundering and Terrorist Financing Law (AML/CFT Law).

CASP Registry

Under the AML/CFT Law, any Provider who offers Crypto Asset Services must apply to the CASP Registry. This way, it will be registered with CySEC and get a CASP license.

In Cyprus, the CASP registry is the Crypto Asset Service Provider registry introduced in June 2021 by the Cyprus Security & Exchange Commission (CySEC).

CySEC is also the regulator of the Market in the Crypto Assets industry in Cyprus (see below).

Crypto assets

According to the AML/CFT Law, crypto assets are a digital representation of value that is not issued or guaranteed by a central bank or public authority. They do not have to depend on a legally established currency and do not have the legal status of currency or money. They are, however, accepted by natural or legal persons as a means of exchange. Thus, they can be transferred, stored, and traded electronically.

Further, crypto assets are not:

  • fiat currencies, or
  • electronic money, or
  • financial instruments (see Part III of the First Appendix to the Investment Services and Activities and Regulated Markets Law).

Note that fiat currencies, or fiat money, is the money declared by the government to be the legal currency in a state: see the Encyclopedia Britannica: Fiat money.

CASP services

According to the AML/CFT Law, a CASP may provide any and/or all of the Crypto Asset services listed below:

  • Exchange between crypto-assets and fiat currencies;
  • Exchange between crypto-assets;
  • Management, transfer, holding and/or safekeeping, including custody, of crypto-assets or cryptographic keys or means for the exercise of control over crypto-assets;
  • Offering and/or sale of crypto-assets, including the initial offering; and,
  • Participation and/or provision of financial services for the distribution, offer and/or sale of crypto-assets, including the first offering.

Licensing obligations

A provider should notify CySEC if:

  • They want to offer Crypto Asset services in Cyprus;
  • Are already established within the EEA; and,
  • Registered with the respective AML/CFT national supervisor.

Also, they must give sufficient evidence that they have a valid registration for each service or activity.

The Provider may be registered in another competent national authority within the EEA. Yet, this registration may not cover the services/ activities offered in Cyprus. In such a case, the Provider must apply for registration to the CASP Registry of CySEC.

Before any Crypto-Asset activity starts, new Providers must register with the CASP Registry of CySEC.

CySEC licensing parameters

CySEC is the regulator of CASP operations. It has full authority to make members follow the regulatory framework. For example, it can put forward guidelines and policy statements for the activities of Crypto Asset Service Providers and/or the examination and authorization of the applications to the CASP registry.

The CySEC regulatory framework rules include the following:

  • The fitness and honesty of the CASP beneficiaries and persons in management positions;
  • The conditions in relation to CASP registration;
  • Organizational and operational requirements;
  • Performing Know Your Client and other client due diligence measures;
  • Drawing the economic profile of clients;
  • Learning the source of client funds;
  • Monitoring the clients’ transactions;
  • Identifying and reporting suspicious transactions; and,
  • Doing a full risk assessment in relation to clients’ activities so as to take the measures necessary for each client, activity, and crypto-asset.

CASP licensing time frame

According to the CySEC Policy Statement, applications submitted to CySEC are examined on a first come, first served basis.

Crypto Asset activities and initial capital

Any Crypto Asset Service Provider in Cyprus must have a minimum regulatory capital. The amount is set according to the Crypto Asset Service Provider Class in which the CASP will operate. The CASP must have this capital at the start of the licensing process and keep it throughout the licensed activity.

CASP Class Type of Crypto-Asset Activity Initial Capital

Class 1

CASPs that provide investment advice

Euro 50.000

Class 2

CASPs providing the service referred to in Class 1 and/or any of the following services:

· reception and carrying forward 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 a firm commitment

· portfolio management.

Euro 125.000

Class 3

CASPs that provide any of the services referred to in Class 1 or 2 and/or:

· 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 a 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.

Euro 150.000

CASP registration fees

For the examination and licensing of a CASP application, a registration fee must be paid to CySEC. The fee is €10.000. It must be paid in full in one payment. Successful applicants will not have to pay an additional fee for the first year of registration.

CASP renewal fees

To renew the Crypto Asset Service Provider license, the total fee is €5.000 each year, paid to CySEC.

Our crypto asset team

Our dedicated team of professional lawyers and financial advisors will be happy to provide both services and advice regarding CASPs. We aim to deliver tailor-made solutions to ensure the success of your CASP application.

Due to the specific nature of the licensing process, it is crucial to get the services of experienced and professional consultants. When CySEC rejects an application, the appeal can take up to two years. In the meantime, the company’s shareholder(s) cannot operate anywhere within the EEA.

Our step-by-step services

Our firm provides a complete service package for your CASP application in compliance with CySEC regulations and policies.

Our services include the following:

  • Advice on the law and CySEC requirements.
  • Building the CASP’s structure according to the client’s specific needs.
  • Drafting the Memorandum of Association according to the AML/CFT Law requirements.
  • Nomination of qualified non-executive directors (if necessary).
  • Registering the company with the Cyprus Registrar of Companies.
  • Drafting the operation manual and the Business plan in accordance with the CySEC requirements, the Anti-Money Laundering Guidelines, and the KYC policy.
  • Drafting relevant documents, application forms, and checklists.
  • Submission of the application to CySEC.
  • Promotion of the CASP application to CySEC and communicating with CySEC on the client’s behalf about application inquiries and proposals.
  • Getting the authorization certificate and registration from the CASP

Our fees

Our payment policy is as follows:

  • 30% upon engagement;
  • 50% upon/before the submission of the application to CySEC;
  • 20% upon CySEC’s final comments and conditions.

Proposed Markets in Crypto Assets (MiCA) legislation on crypto asset services

In anticipation of the adoption of the new Markets in Crypto Assets (MiCA) regulation proposal by the EU, CySEC has not yet imposed any supervisory regulatory requirements. The current Anti-Money Laundering Directive seems to cover compliance sufficiently. It also seems to give sufficient reassurance to existing Crypto Asset Service Providers and/ or new applicants looking to enter the market.

The proposed MiCA regulation aims to set common rules for the regulation of blockchain fintech applications in the EU. It also tries to make EU financial services rules fit for the digital age. When put in place, MiCA will bring the EU to the forefront of blockchain innovation.

The objectives of MiCA are:

  • Legal certainty for crypto-assets not covered by existing EU financial services legislation; pass uniform rules for crypto-asset service providers and issuers at an EU level; and,
  • Pass specific rules for the so-called ‘stablecoins’, including when these are in e-money.

MiCA will cover only crypto-assets that are not financial instruments, deposits, or structured deposits under EU financial services legislation. It will focus on asset-referenced tokens, e-money tokens, and other crypto assets. (In addition, it will regulate asset-referenced token issuers, e-money token issuers, and crypto-asset service providers.)

According to the European Commission, MiCA is expected to be adopted in the next two years. “By 2024, the EU should put in place a comprehensive framework enabling the uptake of distributed ledger technology (DLT) and crypto-assets in the financial sector. It should also address the risks associated with these technologies”.

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