Cyprus Crypto Exchange License

Under MiCA (Regulation (EU) 2023/1114), a CASP is defined as any person providing one or more of the following services on a professional basis:

1. Custody and administration of crypto-assets on behalf of clients;
2. Operation of a trading platform for crypto-assets;
3. Exchange of crypto-assets for funds (fiat currency that is legal tender);
4. Exchange of crypto-assets for other crypto-assets;
5. Execution of orders for crypto-assets on behalf of clients;
6. Placing of crypto-assets (with or without firm commitment);
7. Reception and transmission of orders for crypto-assets on behalf of clients;
8. Providing advice on crypto-assets.

Registration with CySEC

CASPs operating in or from Cyprus must be authorized by CySEC under MiCA. Entities established in other EEA Member States and already authorized under MiCA by their home National Competent Authority (NCA) can passport their services into Cyprus without additional licensing, provided they notify CySEC. Pre-MiCA CASPs registered with CySEC under the national regime before December 30, 2024, may continue operations until July 1, 2026, or until their MiCA application is processed, aligning with the transitional period set by CySEC on October 17, 2024.

MiCA establishes a unified licensing framework with three classes of CASPs, each tied to specific services and minimum capital requirements as outlined in Annex IV. These apply uniformly in Cyprus under CySEC’s oversight:

A. Class 1 License: Minimum capital requirement of €50,000.

Permitted services:

• Providing advice on crypto-assets;
• Reception and transmission of orders;
• Execution of orders on behalf of clients;
• Placing of crypto-assets without firm commitment.

B. Class 2 License: Minimum capital requirement of €125,000.

Includes Class 1 services plus:

• Exchange between crypto-assets and fiat currency;
• Exchange between crypto-assets;
• Operation of a trading platform for crypto-assets;
• Placing of crypto-assets without firm commitment or related financial services.

C. Class 3 License: Minimum capital requirement of €150,000.

Includes Class 1 and Class 2 services plus:

• Custody and administration of crypto-assets or cryptographic keys on behalf of clients;
• Underwriting or placement of crypto-assets with firm commitment;
• Operation of a multilateral trading facility (MTF) for crypto-assets.

Per Article 67 of MiCA, CASPs must maintain prudential safeguards equal to the higher of their class-specific minimum capital or one-quarter of their fixed overheads from the previous year, held as own funds (e.g., Common Equity Tier 1 capital) or approved insurance policies.

To successfully apply for and obtain a Crypto-Asset Service Provider (CASP) license in Cyprus, applicants must fulfill certain conditions set forth by the Cyprus Securities and Exchange Commission (CySEC). Chambers & Co assists clients in meeting these requirements, providing expert guidance and support throughout the application process.

Key Requirements for a CASP License

1. Incorporate a Cyprus-based entity: Applicants must establish a company in Cyprus with a Board of Directors consisting of at least four members, including at least two executive directors. These directors must be approved by CySEC based on their knowledge and experience in the field, and they must pass the fit and proper test administered by CySEC.

2. Satisfy legal substance requirements: Applicants must establish a fully operational office within the Republic of Cyprus and hire local staff on a full-time basis to fulfill the company’s key functions.

3. Comply with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations: Applicants must present adequate policies and procedures that comply with the Law and Directive for the Prevention and Suppression of Money Laundering and Terrorist Financing.

4. Implement effective internal control mechanisms: Applicants must establish adequate internal control mechanisms to ensure the smooth operation and functioning of the company.

5. Establish clear governance arrangements: Applicants must have comprehensive governance arrangements in place, with clearly identified and defined reporting lines and transparent organisational structure.

Obtaining a Crypto-Asset Service Provider (CASP) license in Cyprus involves a series of steps and the submission of various documents to the Cyprus Securities and Exchange Commission (CySEC). Chambers & Co can guide applicants through this process to ensure a smooth and successful application.

Application Procedure

1. Preparation of corporate documents: Applicants must gather all necessary corporate documents, including the incorporation certificate, certificates of directors/secretary, shareholders, address, Memorandum & Articles, and any other relevant documents.

2. Completion of the application form: Applicants must complete the CySEC application form and compile it together with the corporate documents.

3. Development of internal procedures manual, anti-money laundering manual, and know-your-client procedures: These documents must be prepared and filed alongside the application to demonstrate compliance with relevant regulations.

4. Submission of the application and supporting documents to CySEC: Once all required documents are compiled, the application is submitted to CySEC for review.

5. Review and decision by CySEC: CySEC has up to six months from the date of submission to review the application and either approve or deny it.

The application process for a CASP license in Cyprus requires careful preparation and attention to detail. Chambers & Co can provide expert guidance and support to clients throughout this process, ensuring that all necessary documents are prepared and submitted correctly, and increasing the likelihood of a successful application.

Obtaining a Crypto Asset Services Provider (CASP) license in Cyprus requires applicants to pay specific fees to the Cyprus Securities and Exchange Commission (CySEC) for the initial application and subsequent annual renewals.

CySEC Application Fees

1. Initial application fee: The cost of applying for a CASP license in Cyprus is €10,000. This fee covers the processing and evaluation of the application by CySEC.

2. Annual renewal fee: CASP license holders must pay an annual renewal fee of €5,000 to maintain their license and ensure ongoing compliance with CySEC regulations.

3. Non-refundable fees: In the event that an application is declined, the initial application fee of €10,000 is not refundable.

Obtaining a Cyprus Crypto Exchange License involves a detailed process, including meeting capital requirements, preparing and submitting the necessary documentation, and registering with CySEC. Chambers & Co can provide expert guidance and support throughout the process to ensure a smooth and successful application.