Nowadays, Cryptocurrencies can be defined as a common activity for companies (legal people) and individuals (Physical people) which enable them to invest in other markets and exchange currencies.

Investing in Crypto currencies, is very risky if used as an investment alternative, however can be used by both individuals and companies to enjoy fast cheaper exchange transactions where applicable.

Cyprus has several hundred investment firms some of which have decided to include the provision of crypto investment or trade in their strategies, portfolios and services offered to their clients; something that appears to be very attractive this period.

In this article we explain how investors or overseas companies can obtain an EU Crypto license by applying to Cyprus Securities and Exchange Commission (CySEC) which is the regulator issuing these licenses.

As always, source of funds and KYC requirements are key for entering such applications successful. More details on this aspect of licensing can be obtained her. 

 

Cyprus and Cryptocurrencies:

Recent studies have shown that Cyprus might be a key destination for foreign and local companies who they want to establish cryptos in their business. This movement can open a new pillar in the Economy. Thus, new taxes have been voted by the Parliament in Cyprus in 2022  which give multiple benefits to foreigners and Cyprus companies.

This new type of business has been elected in Cyprus in order to attract foreigners who want to invest in the country, and it will enable the Cyprus economy to restart after the economic pressure from around the world, such us COVID lockdowns, Russia’s invasion in Ukraine etc.

 

Which conditions must be met by Companies to get a license in Cyprus in relation to Cryptocurrencies:

The new established or incorporated companies located in Cyprus must apply to the below conditions and requirements in order to be eligible to have a license and operate their business operation by using cryptos.

• Company should be registered in Cyprus (All 4 certificates from the Registrar of Companies)
• Company should have physical office in Cyprus
• CASP application form
• The Memorandum and Articles of the company must have specific clauses regarding the nature of the business.
• The company’s Board of Directors must include at least 4 members, where the 2 must be executive directors. The directors must be approved by CySEC on their knowledge and experience which can be determined by the fit and proper test.
• The directors and members of the Board of Directors must have a clean criminal record, comply with the law and not be a subject to the Money Laundering issues.
• KYC information, such as passports, utility bills etc
• Set up an internal control mechanism, namely CySEC will want to be satisfied that the Company has internal rules and procedures in place, to oversee potential conflict areas, contingency plans, server protection, client protection etc.

The examination process by CySEC usually take up to 6 months from the date of submitting the application and several documents.

What are the requirements to get a Crypto License in Cyprus:

There are 5 simple steps a company should do before proceeding with the process of obtaining a Cryptocurrency License in Cyprus.

1. The Cyprus company should be incorporated according to the laws and regulations that are set by the Registrar of Companies.
2. The company should have or open a Bank account.
3. The expert (appointed by the company) should prepare all the relevant license applications and gather all the required documentation before submitting them in the appropriate supervisory body.
4. The company should meet and recruit qualified employees and Directors who will be able to proceed with the operation of the company.
5. If the application and documents are accepted, the company should proceed with the filling of the License application.

These five steps are preferably to be done by a reliable expert the company should choose before all this process.

 

CySEC Application Fees:

For submitting the application in CySEC it will cost ten thousand (10,000) euros for the application acceptance and five thousand (5,000) euros for the annual renewal of the license.

Upon the application is declined by CySEC, the license fees are not refundable.

 

Types of Licenses:

Cyprus companies dealing with Cryptocurrencies have 3 License choices that will benefits their operations. These 3 Licenses are as follows:

1. Class 1 License – Crypto Asset Services Provider that provides investment advice (The initial capital requirement for these companies is 50,000 Euros)
2. Class 2 License – The service provider will be able to provide services referred to Class 1 as per above and/or any of the below services:

•  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 the initial offering.
•  Placement of crypto assets without firm commitment

3. Class 3 License – The service provider will be able to provide services allowed under the Class 1 & 2 licenses in addition to: (The initial capital requirement for these companies is 150,000 Euros)

• 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.

 

CYAUSE Audit Services services tens of Cyprus Investment Firms and Funds on a monthly basis by providing Compliance services such as Internal & External Audits, ICARA Report, Capital Adequacy Reports, Pillar III services and Ad Hoc services.

We have helped several of our clients obtain their license from CySEC and for some to include in their portfolios the provision of Crypto services. Feel free to enquire with us directly at kt@cyprusaccountants.com.cy