Introduction:

Are you a Crypto Asset Service Provider (CASP) looking to establish or operate within Cyprus? It’s crucial to understand the regulatory landscape to ensure compliance and unlock the full potential of your business. The Cyprus Securities and Exchange Commission (CySEC) serves as the authoritative body overseeing anti-money laundering and counter-terrorist financing (AML/CFT) measures for CASP operations within or originating from Cyprus.

In this Article we delve into the key elements on What a Crypto Asset Service Provider is and its 3 Key Elements on obtaining such a License.

Mandatory Registration with CySEC:

Under the Prevention and Suppression of Money Laundering and Terrorist Financing Law (AML/CFT Law), if your business falls under the CASP definition and operates in Cyprus, formal registration with CySEC is mandatory. This requirement applies to both new ventures and existing businesses with significant crypto-asset activities.

Definition of Crypto Asset Service Provider:

Under the Article 2 of the Prevention and Suppression of Money Laundering and Terrorist Financing Laws of 2007-2021, a Crypto Asset Services Provider means;

«Crypto Asset Service Provider» or «CASP» means a person who provides or exercises one or more of the following services or activities to another person or on behalf of another person, which do not fall under the services or activities of the obliged entities mentioned in paragraphs (a) to (h) of article 2A:

• 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 which allow 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 regarding the distribution, offer and/or sale of crypto assets, including the initial offering;

3 Key Elements:

1. Application Process:

   New Crypto Asset Service Provider must complete the registration process with CySEC before commencing operations. Existing businesses engaging in crypto-asset activities should have submited an application by the end of October 2021 to ensure full compliance with AML/CFT laws and directives.

2. Regulatory Framework:

   Familiarize yourself with the regulatory framework, including the AML/CFT Law and CySEC directives. These encompass crucial aspects such as:

1. Fitness and Probity of the CASP’s Beneficiaries, as well as individuals holding a management position;
2. CASP’s Registration Conditions;
3. Organizational and Operational Requirements;
4. Client Due Diligence (CDD) performance and measures;
5. Establishing the Economic Profile of the Clients;
6. Identifying Clients’ Source of Funds;
7. Monitoring the Clients’ Transactions;
8. Identifying and reporting suspicious transactions;
9. Risk Assessment Activities and Measures in relation to Clients’ Activities.

3. Initial Capital Requirements:

   Depending on the type of crypto-asset activities, CASPs are categorized into Class 1, 2, or 3, each with specific initial capital requirements ranging from €50,000 to €150,000.

Registration Requirements:

As per the CySEC Directive on CASPs Registration, prospective Applicants” must adhere to specific requirements outlined in the CASP Application Form issued by CySEC. These requirements include, but are not limited to:

1. Name, trade name, legal form, and legal entity identifier;
2. Physical address;
3. Services provided and/or activities conducted by the Applicant, as defined in the law;
4. Website;
5. All public addresses of crypto-assets and/or public keys/digital wallets controlled by the Applicant used or capable of being used in its operations;
6. Crypto-assets involved in any activity undertaken by the Applicant;
7. Whether the Applicant accepts other CASPs as customers;
8. Provision of business payment services in crypto-assets to vendors;
9. Operation of Crypto-Assets-ATMs, including the number and geographical location;
10. Registration or supervision status in any other jurisdiction;
11. Submission of all documents and/or additional information specified in the Application Form.

These requirements are crucial for ensuring transparency, accountability, and regulatory compliance throughout the registration process. Applicants must meticulously complete the Application Form and provide accurate information to facilitate smooth registration with CySEC.

CySEC’s approach concernig a CASP is based on the aforementioned Regulatory Framework, as well as the Policy Statement PS-01-2021.

Application Submission:

• CASPs operating in Cyprus must complete and submit the application form along with relevant questionnaires and necessary documentation as per CySEC’s guidelines.

• For CASPs established in the European Economic Area (EEA), registered with EEA National Competent Authorities for AML/CFT purposes related to activities in Cyprus, a notification form submission is required.

Registration Fees:

• An examination fee of €10,000 is applicable for application processing. Successful applicants are exempt from additional fees for the first year.

• Renewal of registration incurs an annual fee of €5,000.

Take Action Now:

Don’t miss out on the opportunities in the rapidly evolving crypto-asset market. Ensure compliance with CySEC regulations to establish trust, safeguard against financial crimes, and unlock the full potential of your CASP business.

For detailed information on registration procedures, regulatory framework, and forms, do hesitate to Contact Us.

Conclusion:

We view Cyprus as the optimal jurisdiction for establishing a CASP, as the CySEC’s framework being the European regulatory framework most closely aligned with MiCA. This enables entities registered in Cyprus to undergo a smoother transition from CySEC registration to MiCA authorization.

Our Crypto-Assets team at Yiorkas Law has gained extensive firsthand experience by successfully registering CASPs under CySEC. Leveraging this expertise, we assist you in selecting crypto-asset services tailored to your business model and goals.

Our approach involves project management to aid clients in gathering necessary documentation and completing application forms. Additionally, we handle all communication with regulators on your behalf to ensure compliance with all prerequisites.

Following successful registration approval, our Regulatory Compliance team offers comprehensive post-registration services to fulfill all regulatory and reporting obligations.