Cyprus Crypto-Asset Service Provider (CASP) Regulation

CySEC has established a regulatory framework for Crypto Asset Service Providers (CASPs) under Directive R.A.A. 269/2021,
following the EU’s 5th AML Directive. This requires CASPs to register with CySEC and comply with AML/CFT regulations,
covering operational, governance, and compliance standards essential for operating a crypto-asset business in Cyprus.

Key Regulatory Requirements

1. Registration Obligations

CASPs operating in or from Cyprus must register with CySEC. This requirement extends to entities established outside Cyprus but providing services within its jurisdiction.
The registration process requires the submission a form along with supporting documents, including details on shareholders, directors, and the entity’s governance structure.

2. CASP Notification

Registration in Cyprus:
CASPs operating from Cyprus must register with CySEC to provide crypto-asset services and comply with its rules.
CASPs from another EEA state providing services in Cyprus are also subject to CySEC registration.

EEA CASPs:
CASPs registered with an EEA National Competent Authority (NCA) for AML/CFT are exempt from CySEC registration but must notify CySEC with evidence of their valid registration. If certain services aren’t covered by the NCA registration, they must apply for CySEC registration before operating in Cyprus.

Non-EEA CASPs:
CASPs from third countries must register with CySEC to operate in Cyprus. CySEC evaluates these applications on
a case-by-case basis, considering factors like organizational structure, geopolitical context, and existing
communication with the home country’s authority. CASPs offering services on a limited scale, especially to
institutional clients, are more likely to be approved. Registered third-country CASPs will be listed on CySEC’s
website.

3. Capital Requirements

CASPs are categorized into three classes based on the services offered, each with specific capital requirements:

Class 1 : €50,000 for investment advice.
Class 2 : €125,000 for services referred to in Class 1 and all 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 from crypto to crypto, e) participate and/or provide financial services related to the distribution, offering and/or sale of crypto-assets (including initial offering), f) placement of crypto-assets without firm commitment, and g) portfolio management.
Class 3 : €150,000 for services referred to in Class 1 or 2 and any or all of the following services: 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 and 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.