On the 25th of June, 2021 Cyprus Securities and Exchange Commission (“CySEC”) introduced the Directive (269/2021) in regard to the registry of service providers whose their business activities are related to Crypto currencies “Crypto-Asset Services Providers (“CASPS”)”, pursuant to section 2 of Article 61E of the Prevention and Suppression of Money Laundering and Terrorist Financing Law, L188(I)/2007 (the “AML Law”), as amended earlier this year by L13(I)/2021 (the “Amending Law”), in order to harmonise domestic legislation with the provisions of the 4th and 5th AML Directives (Directives (EU) 2015/849 and 2018/843) .
The introduction of a process for obtaining a license brings Cyprus one step closer to the Crypto world.
Types of licenses and initial capital requirement
|Type of Service in Crypto currencies||Initial Capital (Euro)|
|Category 1||CASPS providing investment advice||50.000|
|Category 2||CASPS that provides the service of Category 1 and/or any other of the following services:
I. Reception and transmission of orders or/and
II. Execution of orders on behalf of clients or/and
III. Exchange of Crypto currencies and Fiat currencies or/and
IV. Exchange of Crypto currencies or/and
V. Participation or/and provision of financial services related with the distribution, offering or/and sale of crypto currencies, including initial offering or/and
VI. disposal of cryptocurrencies without commitment and / or
VII. Portfolio management
|Category 3||CASPS that provide any of the services of Category 1 and/or 2 or/and
I. management, transfer, transfer, retention, and / or safekeeping, including the depositary, cryptocurrencies or cryptographic keys or means that allow control over cryptocurrencies and / or
II. acceptance and / or disposal of cryptocurrencies with commitment and / or
III. system operation in which interested parties for buying and selling crypto assets may interact in a way that results in a transaction
Conditions and requirements for obtaining a license
- The Memorandum of the Company must have specific clauses regarding the nature of this business.
- The applicant Company must satisfy the minimum capital requirements as set out above.
- At least one director who is a resident of Cyprus to act as Executive director and who passed the fit and ‘proper test’.
- The Company has physical office space in Cyprus.
- Set up an internal control mechanism, namely CySEC will want to be satisfied that the Company has internal rules and procedures in place, to oversee potential conflict areas, contingency plans, server protection, client protection etc.
- The suitability of the shareholders. As with the directors, the shareholders must pass a fit and proper test, especially a background check whereby CySEC is satisfied that they have a clean criminal record as well as experience in the business area.
- CySEC must be satisfied that the Company has such internal procedures so as to avoid any potential conflict of interest with its clients.
Reporting and Compliance Requirements
Companies licensed under the law have ongoing reporting requirements to CySEC, and have to comply with Anti-Money Laundering requirements, as well as have a stringent Know Your Client procedure in place.
A Cyprus CASPS Company must have at least four Directors, 2 Executive and 2 Non-Executive. The Executive Directors should pass a ‘fit and proper’ requirement test, as well as be residents in Cyprus. This means that they must have an investment/financial background, a respected reputation in business circles and a clean criminal record.
The requirement for Cyprus residency is to enable CySEC to correspond and liaise with them especially in regards to reporting, as well as for clarifications and spot checks.
Application Procedure (General Outline)
- All corporate documents of the Company (incorporation certificate, certificate of directors/secretary, shareholders, address, Memorandum & Articles, etc) together with the application form.
- The time frame for the preparation of the application and supporting documents is 1-2 months, depending on the prompt availability of the required documents.
- Together with the above document bundle, and internal procedures manual and anti money laundering and know your client procedures must be filed with the application.
- The application and all supporting documents is filed with CySEC.
- CySEC has up to 6 months from the date of submitting all the application documents, to reply favorably or not to the application.
CySEC Application Fees
Application for the granting of a CASPS authorization costs ten thousand (10,000) euros for the application acceptance and 5000 Euros for annual renewal of the license.
In the event of refusal the license fee is not refundable.
Any Cyprus company wishing to conduct the business that is falling within the three categories mentioned above, must apply to be, granted a license by CySEC.
The setting up of a Crypto related licensed company in Cyprus provides many advantages such as:
- Attractive, low tax regime.
- Relatively simple application procedure as well as low application fees when compared to other EU jurisdictions.