By: A.G. Paphitis & Co Law Firm
The term “cryptocurrency” is never out of the international or the local Cypriot press. After all it is a global phenomenon.
In a recent post by Reuters:
“It’s been a brutal year for investors. Bitcoin’s price has dropped 63 per cent, while the overall cryptocurrency market capitalization has lost $1.63 trillion in value. The collapse of Sam Bankman-Fried’s FTX exchange hammered a long nail into the market.”
The report continued:
“Crypto retail investors losing money is nothing new. A study from the Bank of International Settlements (BIS), conducted between 2015 and 2022, estimated that 73 per cent to 81 per cent likely lost money on their investments in cryptocurrencies. Retail trading has grown increasingly difficult as deeper-pocketed, more sophisticated investors like hedge funds entered crypto as the asset class grew.”
Current Status Quo in Cyprus:
There is a growing call for such assets to be regulated, especially from an EU perspective with the initiative of the European Commission to establish a uniform European Regulatory response is reaching its final stage with the final text of MiCA (Markets in Crypto Assets Regulation) to have been approved by the European Council on the 5th October 2022. However, it appears that Cyprus has already addressed many of the underlying issues surrounding at least the provision of service providers for such a novel class of asset. This is likely to be followed internationally as the media also report that banking giant Goldman Sachs are set to plough millions of dollars into buying or investing in crypto companies. Hardly a player that would get involved in a fading market! Rational business sense should encourage them to look for jurisdictions which have tailor made or well adapted legislation for this asset class. They and others would do well to look to Cyprus.
If you are a Crypto Asset Services Provider (“CASP”), within the meaning of the Prevention and Suppression of Money Laundering and Terrorist Financing Law (“AML/CFT Law”), that provides services in or from Cyprus, you must formally register with the Cyprus Securities and Exchange Commission (“CySEC”).
CASP in the EEA:
If you are a CASP already established in the EEA and registered with one or more EEA National Competent Authorities for AML/CFT purposes in relation to all services or activities undertaken or intended to be undertaken in Cyprus (i.e. involving Cypriot residents, including incorporated or unincorporated entities based in Cyprus), you must submit a notification, providing evidence in relation to your valid registration for each service or activity. Where these services or activities are not covered by the framework that governs your registration for AML/CFT purposes, you should submit an application to be registered as a CASP with CySEC.
New businesses must register with CySEC before commencing their operations in or from Cyprus.
The regulatory framework includes robust rules established under existing laws, inter alia, in relation to:
- The fitness and probity of the CASP beneficiaries and persons holding a management position;
- The conditions in relation to CASPs registration;
- The organisational and operational requirements;
- Preforming Know Your Client and other client due diligence measures;
- Drawing the economic profile of clients;
- Identifying the source of client funds;
- Monitoring the clients’ transactions;
- Identifying and reporting suspicious transactions;
- Undertaking a comprehensive risk assessment in relation to clients’ activities and take proportionate measures per client, activity and crypto-asset in question.
Registration Charges are Certainly not Prohibitive:
- €10.000 for the examination of an application. Successful applicants will not be required to pay an additional fee for the first year of their registration;
- €5.000 for the purposes of renewal of registration per year.
It seems therefore that Cyprus is gearing up to entertain serious players in the market and not the fly by night operations that are starting to abound internationally.
At A.G. Paphitis & Co. LLC, we are fully equipped to assist in all aspects of the application process and to guide you through it – you may contact us. with all of your enquiries.
The information provided by A.G. Paphitis & Co. LLC is for general informational purposes only and should not be construed as professional or formal legal advice. You should not act or refrain from acting based on any information provided above without obtaining legal or other professional advice.
