Crypto-Asset Service Providers (CASP) Licensing

Blockchain is a remarkably transparent and decentralised way of recording lists of transactions. Its best-known use is the exchange of crypto-assets and fiat currencies. With the Blockchain’s continuous growth, new markets, services and products have emerged, which forced governments and responsible bodies to implement legislation and issue regulatory frameworks for its operation in order to safeguard the interests of the people transacting in it.

Our firm’s dedicated team of professionally qualified lawyers and financial advisors with reputable experience in the sectors of Legal and Financial Services will provide proactive services and deliver tailored fit solutions to support and ensure the success of your Crypro-Asset Service (CASP) Provider application.

CASP Licensing & Crypto-Assets

The Cyprus Security & Exchange Commission (CySEC) introduced the Crypto Asset Service Provider (CASP) registry, which is governed by the Prevention and Suppression of Money Laundering and Terrorist Financing Law (AML/CFT Law).

According to the AML/CFT Law, Crypto Assets are defined as a means of a digital representation of value that is neither issued nor guaranteed by a central bank or a public authority, are not necessarily attached to a legally established currency and do not possess a legal status of currency or money, but are accepted by natural or legal persons as a means of exchange and which can be transferred, stored, and traded electronically, and are not:

  1. fiat currencies, or
  2. electronic money, or
  3. financial instruments, as these are specified in Part III of the First Appendix to the Investment Services and Activities and Regulated Markets Law;

What is a CASP

By virtue of the AML/CFT Law, any Provider who offers Crypto Asset services is obliged to apply for registration to the CASP Registry of CySEC and obtain a CASP license.

According to the AML/CFT Law, a CASP may provide any and/or all of the below Crypto Asset services:

  1. Exchange between crypto-assets and fiat currencies;
  2. Exchange between crypto-assets;
  3. Management, transfer, holding and/or safekeeping, including custody, of crypto-assets or cryptographic keys or means which allow the exercise of control over crypto-assets;
  4. Offering and/or sale of crypto-assets, including the initial offering; and
  5. Participation and/or provision of financial services regarding the distribution, offer and/or sale of crypto-assets, including the initial offering;

CASP Licensing obligations

Providers who intend to offer Crypto Asset services in Cyprus and which are already established within the EEA and registered with the respective AML/CFT national supervisor, should submit a notification to CySEC, and provide sufficient evidence in relation to their valid registration for each service or activity.

In case where the registration of the Provider, by any other competent national authority within the EEA, does not cover any of the services or activities which are intended to be offered in Cyprus, an application for registration to the CASP Registry of CySEC is required.

Any new Providers aiming to offer Crypto Asset services in Cyprus are expected to register to the CASP Registry of CySEC prior to the commencement of any Crypto-Asset activity.

CySEC’s Licensing Parameters for CASPs

CySEC being the regulator of CASPs operations, has the absolute authority over the implementation of the regulatory framework, and issues guidelines and policy statements for the activities of the CASP and/or the examination and authorization of the applications to the CASP registry.

CySEC’s regulatory framework rules include the following:

  1. The fitness and probity of the CASP beneficiaries and persons holding a management position;
  2. The conditions in relation to CASP registration;
  3. The organisational and operational requirements;
  4. Preforming Know Your Client and other client due diligence measures;
  5. Drawing the economic profile of clients;
  6. Identifying the source of client funds;
  7. Monitoring the clients’ transactions;
  8. Identifying and reporting suspicious transactions;
  9. Undertaking a comprehensive risk assessment in relation to clients’ activities and take proportionate measures per client, activity and crypto-asset in question.

CASP Information

According to CySEC’s Policy Statement, applications submitted to CySEC are examined on a first-come-first-served basis.

Any CASP providing Crypto Asset services in Cyprus is expected to meet the minimum regulatory capital according to the CASP Class authorized to operate. This capital must be available at the beginning of the licensing process and kept throughout the licensed activity.

CASP Class Type of Crypto-Asset Activity Initial Capital
Class 1 CASP that provide investment advice Euro 50.000
Class 2 CASPs providing the service referred to in Class 1 and/or any of the following services:

a. reception and transmission of client orders

b. execution of orders on behalf of clients

c. exchange between crypto-assets and fiat currency

d. exchange between crypto-assets

e. participation and/or provision of financial services related to the distribution, offering and/or sale of crypto-assets, including the initial offering

f. placement of crypto-assets without firm commitment

g. portfolio management.

Euro 125.000
Class 3 CASPs that provide any of the services referred to in Class 1 or 2 and/or:

a. 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

b. underwriting and/or placement of crypto-assets with firm commitment

c. 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.

Euro 150.000
For the examination and licensing of a CASP application, a registration fee paid to CySEC applies and it amounts to a one-off payment of €10.000. Successful applicants will not be required to pay an additional fee for the first year of their registration.
For the purposes of a CASP license renewal, the total fee of €5.000 per year should be paid to CySEC.

Whether you are an EEA licensed CASP or wish to establish a new CASP entity in Cyprus, our dedicated team of professionally qualified lawyers and financial advisors with reputable experience in the sectors of Legal, Corporate, and Financial Services will be happy to provide proactive services and deliver tailored fit solutions to support and ensure the success of your CASP application.

Due to the specific nature of the licensing process, it is crucial to acquire services from experienced and professional consultants. In cases where CySEC rejects an application, appeal procedures can take up to two years. In the meantime, the company’s shareholder(s) cannot operate anywhere within the EEA.

Our firm provides a complete service package for your CASP application, according to CySEC’s regulatory framework and policy statements.

Our services include the following:

  1. General advice on the applicable laws and CySEC’s requirements
  2. Design and build the CASP’s structure according to the client’s specific needs
  3. Drafting the Memorandum of Association according to the AML/CFT Law requirements.
  4. Provision of qualified non-executive director candidates (if needed).
  5. Filing the company registration with the Cyprus Registrar of Companies.
    Drafting of the operation manual, the Business plan in accordance with the CySEC’s requirements the Anti-Money Laundering Guidelines and the KYC policy
  6. Drafting relevant documents, application forms and appropriate checklists
  7. Submission of the application to CySEC
  8. Promotion of the CASP application to CySEC and maintain open communication with CySEC on the client’s behalf regarding application inquiries and proposals.
  9. Issuance of authorization certificate and registration in the CASP registry.

As a boutique law firm, we like to stay very competitive regarding our fees and at the same time, we make sure that our professional duty of proper care, skill, and attention to the client’s affairs is sustained.

Our payment policy is as follows:

  • 30% upon our engagement,
  • 50% upon/before the submission of the application to CySEC,
  • 20% upon CySEC’s final comments and conditions.

Proposed Markets in Crypto-Assets (MiCA) legislation on Crypto Asset services

In anticipation of the implementation and adoption of the new Markets in Crypto-Assets (MiCA) regulation proposal by the EU, CySEC as the Cyprus regulator of this industry has not imposed any supervisory regulatory requirement yet, since the current Anti-Money Laundering Directive seems to be enough in terms of compliance requirements, which also seems to provide reassurance to existing CASP’s and/ or new applicants looking to enter the market.

The proposed MiCA regulation aims to establish sweeping common rules for the regulation of blockchain fintech applications across the EU, and render EU financial services rules fit for the digital age. When implemented, MiCA will position the EU at the forefront of blockchain innovation.

The objectives of MiCA

MiCA aims to provide:

  1. Legal certainty for crypto-assets not covered by existing EU financial services legislation;
  2. Uniform rules for crypto-asset service providers and issuers at an EU level; and
  3. Specific rules for the so-called ‘stablecoins’, including when these are e-money.

MiCA will be limited to crypto-assets that do not qualify as financial instruments, deposits or structured deposits under EU financial services legislation and will be focused on asset-referenced tokens, e-money tokens and other crypto-assets. (In addition, it regulates asset-referenced token issuers, e-money token issuers, and crypto-asset service providers.)

According to the European Commission, MiCA is expected to be implemented in the next two years. “By 2024, the EU should put in place a comprehensive framework enabling the uptake of distributed ledger technology (DLT) and crypto-assets in the financial sector. It should also address the risks associated with these technologies”

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Our Firm’s dedicated team of professionally qualified lawyers and financial advisors will be happy to provide proactive services and deliver tailored fit solutions to support your growth and optimize your business activities.

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