Crypto License in Cyprus
Cyprus crypto license
COST OF CRYPTOCURRENCY LICENSE
PACKAGE «COMPANY & CRYPTO LICENSE IN CYPRUS»
|26, 900 EUR|
- The CASP is undergoing a consultation regarding its registration and authorization
- Business model consultation
- Consultation on organizational structure
- Reviewing counterparty contracts and consulting with them
- Assuming a client provides an assigned person, guidance on the internal process flow manual
- An application file for the promoter is prepared
- Customization of an internal operations manual
- Manuals of Risk Management, Internal Procedures, and Compliance are prepared customized to each organization’s needs
- Prepare a business plan by reviewing and assisting
- Application form preparation
- Preparation of financial forecasts with assistance and advice
- Verification of compliance with the Company’s front-and-back ends
- Questionnaires for shareholders and directors reviewed
- Documents proving that shareholders are suitable
- The preparation of a capital statement for the shareholder (signed by the client and the auditors assigned to the project)
- Documentation and certificate assistance
- Communication with the CySEC following the submission of the application
- Reviewing credentials and assisting with personnel appointments
- Fees payable to CySEC should be advised
- Questions about the application process can be answered by the application support staff
- Providers of incorporation services
- Cypriot company incorporation
- Company secretary’s registered office
BENEFITS OF OBTAINING A CRYPTOCURRENCY license IN CYPRUS
The popularity of Cyprus amongst financial service providers can be attributed to a number of factors. First of all, the legislation and regulation in the country are in a clear and proven system, allowing service providers to choose from hundreds of licenses for various investment services. Further distinguishing features of these licenses are that they are divided into different levels, allowing for case-sensitive application requirements and faster application approval rates. A wide variety of financial instruments is also recognized and supported in Cyprus, including crypto derivatives. The island’s diverse business environment is further reflected in this. As a result, Cyprus’ taxation scheme is more attractive to corporate growth and development than most continental European countries. Regulatory bodies also keep foreign investors in good conditions when they open companies here, by providing them with extensive rights. As a final advantage, Cyprus does not impose any restrictions on cryptocurrency mining compared to other international jurisdictions.
The licensing system and financial services for cryptocurrencies in Cyprus
A Crypto Asset Service Provider (CASP) in Cyprus offers money exchange services between crypto currencies and fiat currencies. Trading operations involving crypto assets require authorization from a regulatory body in order to be carried out.
CASP applications are issued (or rejected) by the Securities and Exchange Commission (CySEC), which also controls authorized cryptographic asset providers in Cyprus. A SAP is defined by legislation as a person who provides the following services to another person without being bound by legal measures to prevent money laundering:
- Cryptocurrency trading against fiat (traditional) currencies
- Cryptographic asset exchange
- Obtaining, transferring, possessing, or storing cryptographic assets, cryptographic keys, or the means through which cryptographic assets can be obtained
- Cryptographic asset offers and sales, including initial offers
- Distributing, supplying and/or selling cryptographic assets (including the original proposal) and/or providing financial services.
As per the regulator, cryptographic assets are distributed, supplied and/or sold through financial services such as:
- Receiving and transferring instructions
- Client-side execution of orders
- Business owned and operated independently
- Management of cryptocurrency portfolios
- Advice on investments
- Placement and/or underwriting of crypto-assets based on liability types
- Cryptoassets can be placed without creating liabilities
- Manage a multilateral trading platform where crypto assets can be bought and sold.
As far as crypto assets are concerned, there are no clear regulations in Cyprus. It is still necessary to comply with legislative requirements when it comes to operations involving crypto assets. Law does not apply to territories beyond the jurisdiction, but the following operations are permitted:
- Investing in mining
- The functioning of ICOs
- Various digital currencies can be transferred and owned
- Fiat-to-crypto exchange operations
- Cryptographic services creation.
FORMAL REQUIREMENTS FOR OBTAINING A CRYPTOCURRENCY LICENSE
CySEC requires applicants to meet the following primary conditions before they can apply and be approved:
- Managing and owning a company in Cyprus. An executive director shall be one of at least two members of the Board of Directors. Having knowledge and expertise in this area is a prerequisite for all CySEC directors. A CySEC test is also required of them.
- To ensure the smooth operation and functioning of the company, appropriate internal controls must be established.
- Policy and procedure development in compliance with the Prevention and Suppression of Money Laundering and Terrorist Financing Directive.
- The company intends to have a functioning office in Cyprus and to hire full-time employees who can fulfill the company’s core functions.
- The management mechanisms should be transparent and clearly defined so that high-quality management can be achieved.
Most European countries have lower tax rates than the United States
Mines are not restricted
Remote management for owners
An easier way to open an account
LICENSE-SPECIFIC CAPITAL REQUIREMENTS
There are three levels of authorization when it comes to the authorization process. Crypto asset services provided by the company are the basis for their definition. Consequently, capital requirements vary based on the authorization level.
Investment advice is provided by CASP, which falls under this category. Initially, they must raise €50,000 in capital.
As part of their class 1 license, CASPs are authorized to provide the following cryptographic asset services:
- Cryptographic asset exchange and/or fiat currency exchange
- Without a fixed liability, cryptographic assets can be placed
- Performing functions on behalf of clients, including receiving and executing orders from customers.
- Management of crypto portfolios
- Distributing, supplying, and/or selling cryptographic assets (including the original offer) or providing financial services related to such activities.
EUR 125,000 is the minimum capital requirement for companies receiving such a permit.
Class 3 license
Among the services provided by CASPs, which fall into this category, are those included in Class 1 and Class 2 licenses, and cryptographic asset services such as:
- A firm commitment to underwrite and/or place crypto assets
- Operations relating to cryptographic assets, cryptographic keys, or cryptographic asset controls, including administration, transfer of ownership, transfer of site, storage, and/or storage (including storage).
- Multiple third parties buying and selling interests in crypto assets as a result of a multilateral system.
The initial capital requirement for receiving such a permit is 150,000 euros.
Cryptographic services must be provided by companies that meet any of these three criteria.
FORMAL REQUIREMENTS FOR ESTABLISHING A FINANCIAL SERVICES COMPANY IN CYPRUS
Applicants for cryptocurrency licenses must be registered as financial service providers in order to offer crypto asset services. As a result, the following requirements must be met in order for the company to be established:
- The presence of a virtual office space is not enough to obtain a CASP license if you own or rent a physical office space
- Allocating capital through a bank account
- For senior positions, relevant financial sector experience is required) and a sufficient number of employees
- Implementing EU directives in internal instructions and policies
- Description of available capacities, services, software and disclosure of personal information that are clear, detailed, and accurate
- To comply with relevant KYC regulations, it is essential to acquire and implement accurate software, tools, and practices.
THE PROCESS OF ESTABLISHING A COMPANY IN CYPRUS
Establishing a company in Cyprus involves four main steps. All the documents required for application must be gathered in the first step. Reports and statements regarding a company’s registration and registered office space are included in those documents. Additionally, an Articles of Association (MAA) and statement of capital must be submitted with the application. Additionally, a formal company name must be selected and submitted by the applicant. The name of the company must be unique and different from those of other Cyprus companies registered with the company registrar. Lastly, the application must be submitted to the Registrar of Companies in Cyprus. The registrar’s decision is the final step. An approval or denial is usually delivered within five working days of submitting an application of this type.
Before applying for CASP authorization, here are some steps to ensure success
The applicant must meet the following criteria in order to submit a CASP application:
- Possess a Cyprus-registered company that is fully functional and compliant, as well as an office space there
- Ensure that beneficiaries and service providers are in compliance with the law – particularly regarding their reputation
- Identify the beneficiaries and policies of the company and prepare a report about them
- Ensure that all forms and questionnaires are included in the documents package
- Ensure their intended CASP license class meets the capital requirements
- Ensure KYC procedures are followed
- Determine the economic profile of buyers and assess various risks associated with them
- Determine how operations will be funded
- Detect and report suspicious transactions as soon as they occur, by continuously monitoring transactions
- In order to avoid potential conflicts of interest with clients, ensure that their internal policies and procedures are in place.
Based on the availability of the required documents, it is expected that the application and supporting documentation will take 1–2 months to prepare
Crypto regulation in Cyprus overview
|Period for consideration
||6 months||Annual fee for supervision||5,000|
|State fee for application
||10,000 EUR||Local staff member||Required|
|Required share capital||from 25,000 EUR||Physical office||Required|
|Corporate income tax||12.5%||Accounting audit||Required|
APPOINTING INDIVIDUALS TO MANAGEMENT POSITIONS
In order for a CASP to be registered, at least one of the Executive Directors must live in Cyprus. The fit and proper test must also be passed by executive directors.
A background check is also required for shareholders so that it can be declared that they are clean criminally. Similar to the executive directors, the shareholders must pass a fit and proper test and complete a background check. Relevant experience in the business area is another requirement for individuals in management positions.
Forms and documentation needed for CASP authorization applications
An applicant must submit the following documents in order to submit an authorization application:
- Form for applying to CASP
- Documents pertaining to the company (incorporation certificate, director/secretary certificate, shareholders information, Memorandum & Articles, etc.).
- A manual of internal procedures, an anti-money laundering manual, and a guide to knowing your clients
- Providing evidence that the CASP owns sufficient funds (amount, sources, relevant contracts)
- Information about the financial situation (forecasts and financial statements if applicable)
- Information about organizational and operational aspects (initial three-year operations plan, organizational structure, internal procedures) demonstrating that the company is committed to the best interests of its customers and will minimize risks of loss or imprudence.
- Financial and accounting workflows and marketing strategy
- Customer onboarding workflow documentation for internal AML/KYC procedures
- Crypto asset wallet and public key addresses managed by the CASP
- Workflows and procedures for data management documentation
In the following six months, CySEC may approve or deny the application based on its submission date.
CYSEC APPLICATION FEES
Application for a Crypto Asset Services Provider (CASP) authorisation costs 10.000 euros, following an annual license renewal fee of 5,000 euros.
If the application is declined, the license fee will not be refunded.
Providers of crypto assets must keep following these duties and practices in order to maintain compliance, operate in accordance with regulatory requirements, and avoid losing their CASP licenses:
- Combating money laundering and terrorism financing by developing and implementing appropriate policies, procedures and controls
- Managing associated risks regularly and assessing them as needed
- Forming a customer profile and updating customer information by collecting personal and other data
- Accounting within an organization
- Providing regular reports to the Anti-Money Laundering Group (MOKAS) about business operations
- Assessing each suspicious transaction on the basis of its nature, especially when there are large transactions or transactions with no apparent economic or legal purpose
- Preventing money laundering and terrorism financing through internal controls
- Compliance managers are appointed
- Employees who handle cryptographic assets should receive continuous training
Transactions involving exchange, transfer, participation, and provision of services related to the offer or sale of assets are subject to the above compliance requirements.
PHYSICAL PRESENCE OF THE FOUNDER
There is no specific requirement for the founder of Cyprus-based CASP to be physically present in the country. It is formally required for at least half of the company personnel to be in Cyprus. This requirement involves Executive Directors.
REGISTERING STRUCTURAL / INTERNAL CHANGES
The following amendments can be requested by registered CASPs for a cost between 1,000 and 5,000 euros:
- Provider changes services or activities related to them
- Address update for the crypto wallet
- Any member of management or the board of directors’ details have been updated
- Beneficiaries’ new information
- Website updates from the provider
CRYPTOCURRENCY TAX RATES IN CYPRUS
As briefly noted above, in contrast to other countries in Europe, Cyprus has low corporate income tax rates. Crypto currencies are recognized by local authorities as a taxable asset, subjecting CASPs to standard corporate tax rates. Currently income from trading cryptocurrencies is taxed at a rate of 12.5%. Income received from cryptocurrency trading can be reduced by expenses that are incurred for the production of such income.
Regulated United Europe is a team of experts who will help you open a company and obtain a cryptocurrency license in Cyprus. We provide legal guidance and ensure strong preparation for business and licensing applications, working hand in hand with our clients to help them navigate the administrative side of their business with confidence.
FREQUENTLY ASKED QUESTIONS
Is it possible to obtain a license for crypto activities in Cyprus?
That's right. There are three licensing classes based on the services a crypto company provides. Depending on the class, the scope of services and the initial capital requirements vary .
What is the process for getting a crypto license in Cyprus?
Cyprus Securities and Exchange Commission (CySEC) registers and regulates crypto companies. To provide cryptoexchange services within the local regulatory framework, crypto companies in Cyprus are referred to as Crypto Asset Service Providers
In Cyprus, what are the activities of the crypto license?Earlier, I briefly mentioned that the scope of crypto activities varies by licence class. Only investment and financial advice can be provided by CASPs with a Class 1 licence. A CASP with a Class 2 license may provide financial and investment advice and:
- Transmit and receive orders from clients
- Assist clients with their orders
- Fiat currency and crypto-assets exchange
- Cryptocurrency exchange
- Distribute, offer, and/or sell crypto-assets and provide financial services related to them
- Crypto-assets should be placed without firm commitments
- Portfolio management for crypto assets
- Crypto-assets or cryptographic keys are administered, transferred, held, and/or safe kept, including custody,
- Assist with the underwriting and/or placement of cryptoassets
- Multilaterally combine buyer and seller interests in crypto-assets in a way that results in a transaction.
What is the process for getting a license?Depending on the availability of the documents, gathering all the necessary documents and reports will take between 1-2 months. It may take up to six months for CySEC to evaluate and make a final decision once the application is submitted with all the required documents.
Crypto companies can be owned by non-residents of Cyprus?
That's right. Crypto company owners do not need to be residents of any particular state.
Is it possible for non-Cypriots to serve on the board of a Cyprus crypto company?
That's right. Cyprus requires all corporations to have at least four directors, including at least two executive directors, on their board of directors. The board does not require residents to live in the area.
To obtain a license, do you need a bank account?
That's right. Establishing a legal entity in Cyprus requires opening a bank account.
Can a virtual currency service provider operate with a minimum authorized capital?Crypto companies in Cyprus are required to have the following minimum authorized capital:
- 50,000 euros for a Class 1 license
- The license fee for Class 2 is 125,000 euros
- For a Class 3 license, 150,000 euros are required
Can crypto-licenses be issued for a certain period of time?
Cypriot crypto licenses are issued annually; license holders must pay an annual renewal fee of 5,000 euros to renew them.
A crypto company's charter capital is paid in in what way?
Before the company becomes a legal entity, it must be deposited into its bank account.
What is the deadline for depositing capital to open a company and obtain a crypto license in Cyprus?Crypto companies must deposit capital after they are established but before they apply for a crypto license.
What are the requirements for applying for a cryptographic license in Cyprus?
An applicant must complete the following steps before applying for a crypto license in Cyprus:
- Comply with all relevant laws and regulations
- Ensure that registration conditions are met
- Ensure that organizational and operational requirements are met
- KYC regulations must be followed
- Analyze buyers' economic profiles
- Identify the source of funds for the implementation of operations
- Develop a system for monitoring transactions that is compliant and functional
- Fraudulent transactions should be detected and reported
- Identify and assess risks to the business and customers
What are the benefits of getting a crypto license in Cyprus?
Companies registered in Cyprus benefit from Cyprus crypto regulation for a number of solid reasons. First and foremost, Cyprus' regulatory framework follows EU crypto regulation, allowing a smooth transition to and from other markets. As for financial instruments, Cyprus supports a wide range, including crypto derivatives. The ability to offer a very broad range of services is one of the advantages that crypto companies have. Cyprus has low tax rates for crypto companies, which is a third major advantage.
Do Cyprus cryptocurrency companies undergo audits?That's right. Directors must present financial statements to shareholders at the annual general meeting. An authorized local auditor must be consulted following the meeting in order to audit the financial statements and directors' report.
Is it possible for a crypto company's director to be a non-Cypriot resident?
Yes, of course. It doesn't matter what type of entity a crypto company registers as, residence is not restricted.
Is there a system in place in Cyprus for preventing money laundering and terrorism financing?As the regulatory framework in Cyprus is in accordance with EU regulations, crypto companies are required to take certain measures to prevent money laundering and terrorism financing. There are several of them, including:
- Money laundering and terrorism financing policies, procedures, and control measures must be developed and implemented
- Measuring and mitigating risks associated with the project
- Creating a customer profile and updating it by asking customers for personal information
- Keeping records of internal transactions
- Submitting regular reports to MOKAS regarding the work done
- Based on the nature of the suspected transaction, evaluating each one
- Prevention of money laundering and terrorism financing by maintaining internal control
- The appointment of reputable compliance managers
- Working with assets requires employees to be educated
What are the procedures in Cyprus for preventing money-laundering and supporting terrorism?When dealing with suspicious transactions, the above measures must be applied thoroughly, particularly in the case of large transactions and transactions that do not seem to have any clear economic or legal purpose.
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