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.
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:
- Reception & Transmission;
- Execution of orders on behalf of clients;
- Portfolio management;
- Investment advice;
- Exchange between cryptocurrencies and fiat money;
- Cryptocurrency asset exchange;
- Participation and / or provision of financial services on distribution, supply and / or sale of cryptocurrencies, including the initial offering;
- 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:
- management, transfer, retention, and / or safekeeping, including the depositary of cryptocurrency assets or cryptographic keys or means that allow control over cryptocurrencies;
- Underwriting and/or placing of crypto-assets on a firm commitment basis;
- 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.