Cyprus Crypto Exchange License

Cyprus Crypto Exchange License

Cyprus has emerged as a leading jurisdiction for cryptocurrency-related businesses, offering a favourable regulatory environment and a robust infrastructure for digital asset exchange operations. Chambers & Co provides comprehensive legal services and support to assist clients in obtaining a Cyprus Crypto Exchange License, ensuring compliance with local regulatory requirements and guiding them through the entire process.

I. Definition of a Crypto Asset Services Provider

A CASP is defined as a person providing or carrying out one or more of the following services or activities:

  1. Exchange between cryptocurrencies and fiat money;
  2. Exchange between crypto assets;
  3. Management, transfer, retention, and/or safekeeping of cryptocurrencies or cryptographic keys;
  4. Offering and/or selling cryptocurrencies, including initial public offerings;
  5. Participation in and/or provision of financial services related to the distribution, offering, and/or sale of cryptocurrencies.

Registration with CySEC

A CASP providing services in or from Cyprus must register with the Cyprus Securities and Exchange Commission (CySEC). CASPs established in the EEA and registered with EEA National Competent Authorities for AML/CFT purposes must also submit a notification or apply for registration with CySEC for services involving Cyprus residents.

 

II. Types of Licenses and Capital Requirements

There are three types of CASP licenses available in Cyprus, each with its own capital requirements and permitted services:

A. Class 1 License: This license allows CASPs to provide investment advice on crypto assets.

The initial capital requirement is €50,000.

B. Class 2 License: With this license, CASPs can provide the services permitted under Class 1, as well as the following:

  • 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 initial offerings.
  • Placement of crypto-assets without firm commitment.
  • Portfolio management.

The initial capital requirement for a Class 2 License is €125,000.

C. Class 3 License: This license permits CASPs to provide the services allowed under Class 1 and Class 2 licenses, as well as the following:

  • 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.

The initial capital requirement for a Class 3 License is €150,000.

III. Requirements for Obtaining a Crypto-Asset Service Provider License in Cyprus

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.

IV. Application Process for a Crypto-Asset Service Provider License in Cyprus

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.

V. CySEC Application Fees for Crypto Asset Services Providers

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.

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