Crypto Asset Service Provider License in Cyprus

Apply for you Crypto asset service provider license now:

As from June 2021 if you want to provide crypto exchange services within a regulatory framework you need to register (acquire license) to the Crypto Asset Service Providers (CASP) Registry.The competent authority is Cyprus Securities and Exchange Commission (CySEC).

Definition of Crypto Asset Service Provider:

Crypto asset Service Provider 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:(a) Exchange between crypto assets and fiat currencies;(b) Exchange between crypto assets;(c) Management, transfer, holding and/or safekeeping, including custody, of crypto assets or cryptographic keys or means which allow the exercise of control on crypto assets;(d) Offering and/or sale of crypto assets, including the initial offering; and(e) Participation and/or provision of financial services regarding the distribution, offer and/or sale of crypto assets, including the initial offering”

Who is eligible to apply for a Crypto Service Provider License:

• crypto asset service providers providing or carrying out services or activities on a professional basis from the Republic of Cyprus, irrespective of their entry in the register of a Member State for the services or activities they provide;

• crypto asset service providers providing or carrying out services or activities on a professional basis in the Republic of Cyprus, other than persons providing or carrying out services or activities in the Republic of Cyprus relating to cryptocurrencies and which are registered in a Member State for the services or activities they provide.

An application by the crypto-asset service provider must be submitted to CySEC for its registration in the register of crypto-asset service providers.

Requirements for license approval:

• Documents requested by CySEC

• Good reputation, knowledge, experience and skills of its executives

• A minimum of 4 directors, of which two will manage the business activities and the remaining two will be independent;

• Appropriate policies and procedures in accordance with the Law and relevant directives;

• The necessary funds (see in the next paragraph)

• If operating online, a personal website owned and operated by the applicant

• No conflict of interest between its staff and clients

• Good governance arrangements, with clear, transparent and detectable lines of reference

• Appropriate systems and control mechanisms for minimizing the risk of theft or loss of its clients’ crypto-assets data

• Appropriate administrative and accounting procedures, internal control mechanism, effective risk assessment procedures and effective control and security mechanisms of electronic data processing systems

Appropriate security mechanisms to ensure and verify the authenticity of the means of transmitting information, minimizing the risk of data destruction and unauthorized access and preventing the leakage of information, so that the confidentiality of the data is always kept.

Capital Requirements:

The CySEC Directive has set capital requirements for the applicants. Crypto-Asset Service Providers are required to possess enough own funds that are at least equivalent to the greater of the amounts mentioned below:The initial amount of capital mentioned in the Annex to the directive that commensurate with their operations and nature;Twenty-five percent or one-quarter of the Crypto-Asset Service Providers’ fixed expenses during the preceding year. The provision of this paragraph will be brought into effect as follows:

• From January 1, 2022, 30% of the applicable amount;

• From January 1, 2023, 60% of the applicable amount;

• From January 1, 2024, 100% of the applicable amount.

The applicants are also required to pay the amount of €10,000 upon the submission of their application which is not to be refunded if the application is rejected.The applicants will be informed by the CySEC within the period of six months from the date of submitting the application, whether their application is successful or not.As soon as the application of registration is officially approved, the applicant will be registered in the register by CySEC.Renewal of the registration costs €5,000 per year. Amendments in the particulars of the service provider are allowed as well and the fees will be between the scale of €1,000-€5,000 depending on the amendment. Possible amendments include any changes of the following:

• in the services or related activity of the provider

• of the address of the crypto assets

• of a board member or any person holding an administrative position

• in beneficiaries

• in the website of the provider

Public Information:

The register shall be available in the official website of CySEC and shall be visible to the general public showing the following information in relation to the registered crypto asset service providers:

• The name, the trading name, the legal type and the legal entity identifier of the crypto asset service provider

• The physical address of the crypto asset service provider;

• The services being offered and/or the activities the crypto asset service provider may offer and/or perform as per subsections (a) to (e) of section 2(1) of the Law.

• The website of the crypto asset service provider.

Types of License:

You can apply for one of the three different licenses. Each license gives permission to the crypto service providers for different activities and also the required initial capital is different for every license.Class 1 License: allows Crypto asset service providers only to provide investment advice.The initial capital required for this license is €50.000.Class 2 License: allows Crypto asset service providers to provide the service referred to in Class 1 and/or any of the following 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.

The initial capital required for this license is €125.000.Class 3 License: allows Crypto asset service providers to 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 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.

The initial capital required for this license is €150.000.

How we can assist:

1. Incorporation of an entity (company) in Cyprus
2. Undertake the application for the License
3. Opening of Bank Accounts in Cyprus
4. Find an office space for your entity (in order to fulfil the substance requirement for anti-avoidance purposes)
5. Tax planning of company’s owners/shareholders (income from dividends)
6. Permanent residency application for company’s owners
7. Drafting legal documents on any matter
8. Anything else you may need

Contact details:

Phone number: +357 97680423 (Available also on Whatsup) Email: [email protected] book an Appointment for a live discussion (available video call option)Article written by Grigoris Aivazidis – Financial Advisor L.A Law Firm