Becoming a Crypto-Assets Services Provider (CASP) in Cyprus

The Cyprus Securities and Exchange Commission (CySEC), is the anti-money laundering (AML) and counter-terrorist financing (CFT) supervisor for crypto-asset operations undertaken in or from Cyprus, maintains the register of Crypto-Assets Services Providers (CASP).

CASP within the meaning of the Prevention and Suppression of Money Laundering (AML) and Terrorist Financing (CFT) Law, that provides services in or from Cyprus, are required to formally register with CySEC under the regulatory framework of the said AML/CFT Law, the CySEC Directive for the register of crypto-asset services providers and the CySEC directive for the prevention and suppression of money laundering and terrorist financing.

Within this article, we explore what CySEC treats as crypto-assets, which crypto-businesses should register as a CASP under CySEC, and the requirements for a CASP registration and operation.

CySEC and Crypto-Assets

For the purposes of the registration as a Crypto-Assets Services Provider (CASP), the term Crypto-Assets refers to a digital representation of value that is

  • neither issued nor guaranteed by a central bank or a public authority,
  • it is not necessarily attached to a legally established currency and
  • does not possess a legal status of currency or money, but
  • is accepted by natural or legal persons as a means of exchange and
  • which can be transferred, stored, and traded electronically, and
  • it does not qualify neither as fiat currency, nor as any of the instruments termed
    • as Financial Instrument Tokens (FIT) which qualify as financial instruments under the Investment Services and Activities and Regulated Markets Law, transposing MiFID II;
    • and E-Money Tokens (EMT), which qualify as Electronic Money under the Electronic Money Law, transposing EMD.

CASP business models

Following from the crypto-asset description adopted by CySEC defined above, the CASP registration concerns, without this list being exhaustive, the following crypto-business models and cases:

  • Cryptocurrency exchanges: the digital marketplaces where you can buy and trade cryptocurrencies, crypto-asset, altcoins, NFT and so on, either as crypto-to-crypto or as fiat-to-crypto and vice versa transactions. Think of Coinbase, the US-listed cryptocurrency exchange and other centralised crypto-exchanges. It will be interesting to see, in practice, the regulators’ attitude towards decentralised or semi-centralised crypto-asset exchanges.
  • Crypto Wallet businesses and anyone that providers management, administration, transmission, transfer, retention, custodianship and safekeeping of crypto-assets or cryptographic keys or means which allow for the exercise control in crypto-assets.
  • ICO, STO, IEO, IDO
    • all initial offerings, offerings and/or sale of crypto-assets.
    • participation and/or provision of financial services related to the distribution, offering and/or sale of crypto-assets. Such financial services cover:
      • Reception and transmission of orders.
      • Execution of orders on behalf of clients.
      • Dealing on own account.
      • Portfolio management.
      • Provision of investment advice.
      • Underwriting and/or placing of crypto-assets on a firm commitment basis.
      • Placing of crypto-assets without a firm commitment basis.
      • Operation of a multilateral system where multiple third-party buying and selling trading interests in crypto-assets are able to interact in the system in a way that results in a transaction.

Which businesses should obtain a CASP registration under CySEC?

All new businesses that provide any combination of the crypto-asset activities and services in the table below describing the three (3) CASP classes, must submit an application to register with CySEC before commencing their operations in or from Cyprus.

In relation to all services or activities undertaken or intended to be undertaken in Cyprus, involving Cypriot residents, including incorporated or unincorporated entities based in Cyprus;

  • any CASP established in the EEA and registered with the respective AML/CFT national supervisor must submit a notification to CySEC, these CASP must provide evidence in relation to their valid registration for each service or activity, and in cases where these services or activities are not covered by the framework that governs their CASP registration for AML and CFT purposes, an application should be submitted for registration as a CASP with CySEC.

CySEC has six (6) months to decide on the application for crypto-assets services provider (CASP) registration.

The requirements for a CASP registration and operation

All CASP applicants must submit the application form, the related questionnaires, and any relevant supporting documentation. In addition, to successfully obtain and maintain their crypto-assets services provider registration, a CASP needs to comply with the following requirements for registration and operation:

  • Initial capital adequacy and own funds:
    • The initial capital requirements depend on the type of services to be provided, as detailed in the CASP Classes table below and range from 50,000 EUR to 150,000 EUR.
    • The own funds’ requirement for CASP is at least equal with the greater amount of the following:
      • The amount of the initial capital that the respective CASP applicant is required to possess as per the CASP Classes table, or
      • A quarter (1/4) of the CASP’s fixed overheads of the previous years, that is based on a transitional basis, starting from
        • 30% of the 1/4 of fixed expenses from 1 January 2022,
        • 60% of the said fixed expenses from 1 January 2023,
        • and finally, 100% of the said expenses from 1 January 2024 and thereafter.
      • Competency of directors and shareholders: UBOs, directors and persons holding a managerial position are required to be of good repute and competency. Additionally, the financial soundness of beneficiaries with a qualifying holding in the applying crypto-assets services provider is required.
      • Board composition and Staff: the CASP board must be composed of at least 4 directors, of which 2 perform executive duties and the other 2 being independent non-executive directors. The majority of the board need to be permanent Cyprus residents. It is also required that the persons employed possess the appropriate knowledge, experience, and competence to perform their assigned responsibilities.
      • Close links: it is required to ensure that any close links existing between the applying CASP and any third parties do not impede CySEC to perform its supervisory functions.
      • AML and risk management: it is of particular importance for the applying crypto-assets services provider to have in place risk management systems and adequate procedures and systems to ensure compliance with the AML Law and the related Directive.
        • The Travel rule is a noteworthy aspect of the AML/KYC requirement that calls for unique transaction identifiers and more details to be gathered from originators and beneficiaries, which can be individuals, legal entities or obliged entities.
      • Governance and operational arrangements: the applying CASP needs to demonstrate robust governance and business continuity arrangements, record-keeping, complaint handling processes and remuneration conditions are in place.
      • Organisational arrangements: the proper administrative, accounting, internal control, risk assessment, and digital processing of data systems/mechanisms, protection, and confidentiality of data are required.
      • Operational Functions’ outsourcing: it is required for maintaining adequate outsourcing arrangements, especially for the outsourcing of critical functions with the view of ensuring business continuity and compliance with the AML regime and the applicable legal and regulatory framework.

 

CASP ClassType of crypto-asset activity and serviceInitial Capital
Class 1CASP that provide investment advice50,000 EUR
Class 2CASP that provide investment advice
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.
125,000 EUR
Class 3CASP that provide investment advice
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
and/or
any of the following services:
• 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.
150,000 EUR
Registration and renewal fees for all classes10,000 EUR for the examination of an application

5,000 EUR annual renewal fee from year 2 onwards

SALVUS can contribute to your crypto-asset business success

We have a dedicated team on Crypto-Assets regulation and compliance, which has been leading the discussion on cryptos regulation and our stellar track-record of applications to CySEC, enable us to successfully complete your Crypto-Asset Service Provider (CASP) registration.

Please contact us at [email protected] to request more information and to ask our Crypto-Asset team any questions on CASP registration.

How SALVUS can help you Register as a CASP

Our Crypto-Assets team at SALVUS has been at the forefront of crypto-assets development in the European Union for several years, publicly speaking at events and producing thought leadership. This, accompanied by our experience in successfully submitting applications to CySEC for investment firms and investment funds, enable us to handle the rules of your CASP registration in a straightforward manner.

Through our Crypto-Asset Service Providers (CASP) Registration Services, we help new and existing CASP that provide services in or from Cyprus submit a dully completed application form, along with relevant questionnaires and any additional information and required evidence.
We also help CASP established in the EEA and registered with the respective AML/CFT national supervisor in relation to all crypto-asset services or activities undertaken or intended to be undertaken in Cyprus, to submit the relevant notification form to CySEC.

Please contact us at [email protected] to request more information and to ask our Crypto-Asset team any questions on CASP registration.

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Should you be interested to find out more about crypto-assets, blockchain, or Anti-Money Laundering (AML), please visit our selected previous publications below:

The information provided in this news item is for general information purposes only. You should always seek professional advice suitable to your needs.

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