Background
In June 2021, following the recent implementation and enactment of the 5th AML Directive into national legislation, the Cyprus Securities and Exchange Commission ("CySEC") introduced — via Directive 269/2021 — the creation of a Crypto-Asset Service Providers ("CASP") register, together with the conditions governing its operation, registration and supervision.
This development requires interested applicants to apply to CySEC, as the supervisory body, for registration in the register before they can provide crypto exchange and related services within a regulated framework that had, until then, remained largely untouched for many years.
Requirements
To be approved by CySEC as a licensed crypto-asset service provider, an applicant must satisfy the following conditions:
- Incorporate an entity in Cyprus with two executive and two non-executive directors, the majority of whom (three out of four) must be tax residents of Cyprus. Directors must be approved by CySEC following an assessment of their knowledge and experience and must satisfy the "fit and proper" test
- Satisfy the legal substance requirement by establishing a fully operational office within the Republic and hiring local staff on a full-time basis to perform the key functions of the company
- Present adequate policies and procedures compliant 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
- Have consummate governance arrangements in place, with reporting lines that are transparent and clearly identified and defined
Licence Categories and Capital Requirements
CySEC classifies CASP registrations by the range of services offered, with graduated minimum capital requirements corresponding to each licence category. The applicable class — and its accompanying capital threshold — depends on the specific crypto-asset services the applicant intends to provide, from the receipt and transmission of orders through to the operation of a trading platform and custody of client assets.
Fees and Subscriptions
Applicants are required to pay EUR 10,000 upon submission of their application, which is not refunded if the application is rejected. The yearly renewal of a registration in the register amounts to EUR 5,000.
How ASC Can Help
ASC guides applicants through the entire CASP registration process — from company incorporation and director appointments to substance solutions, AML policy drafting, internal controls and the CySEC application itself. Contact us to discuss your crypto-asset business.