Overview of the Cyprus Cryptocurrency License (CASP) Application Guide

Overview of the Cyprus Cryptocurrency License

The Cyprus Cryptocurrency License (CASP), issued by the Cyprus Securities and Exchange Commission (CySEC), is designed to regulate Crypto Asset Service Providers (CASPs). View details.  This license allows businesses to offer various cryptocurrency-related financial services, such as trading, custody, issuance, and investment management, within a regulated framework.

As a member of the European Union, Cyprus provides significant international advantages for CASP license holders. Businesses with this license can legally operate within the European Economic Area (EEA) and benefit from EU passporting rights, enabling cross-border service provision without requiring additional licenses in other member states. Moreover, the Cyprus CASP license is widely recognized in international markets, helping companies build credibility and attract global investors.

License Classifications

The Cyprus CASP license is categorized into three classes, each corresponding to different levels of service complexity and capital requirements:

Class 1 License

  • Functions: Authorizes the provision of investment advisory services related to crypto assets.
  • Target Businesses: Companies offering advisory services without handling client assets or executing transactions.
  • Capital Requirements: Minimum capital of €50,000.

Class 2 License

  • Functions: Includes Class 1 services along with:
    • Crypto-to-fiat currency exchange.
    • Crypto-to-crypto exchange.
    • Reception and execution of client orders.
    • Crypto asset portfolio management.
    • Financial services related to crypto issuance.
  • Target Businesses: Companies actively involved in crypto trading and asset management.
  • Capital Requirements: Minimum capital of €125,000.

Class 3 License

  • Functions: Covers all services under Class 1 and Class 2, plus:
    • Underwriting and distribution of crypto assets.
    • Wallet management, including key storage.
    • Operation of multilateral trading platforms (e.g., crypto exchanges).
  • Target Businesses: Companies offering comprehensive cryptocurrency services, such as exchanges or large custodians.
  • Capital Requirements: Minimum capital of €150,000.

This tiered licensing system allows businesses to choose a license level that aligns with their operational needs, ensuring flexibility in addressing market demands.

Advantages of the Cyprus Cryptocurrency License

The Cyprus CASP license serves as a strategic gateway to the global crypto market. Below are the key advantages in terms of regulation, taxation, and market access:

Regulatory Transparency and Global Alignment

The Cyprus CASP license adheres to the EU Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) frameworks, ensuring compliance with international standards. This transparency reduces compliance risks and enhances trust among clients and investors. Additionally, Cyprus aligns its regulatory framework with the EU’s Markets in Crypto-Assets Regulation (MiCA) to remain consistent with global trends.

Favorable Taxation and Business Environment

Cyprus offers a corporate tax rate of 12.5%, one of the most competitive in the EU. Cryptocurrency businesses can optimize their tax liabilities through strategic planning. Furthermore, there are no additional restrictions on activities like crypto mining, allowing for business expansion.

The streamlined registration process and efficient approval timelines in Cyprus facilitate swift market entry for license applicants.

Global Recognition and Market Access

A Cyprus CASP license allows businesses to operate within the unified EU market while leveraging the international reputation of CySEC for broader global outreach. For companies planning European expansion, this license eliminates the need for separate regulatory approvals in individual countries, saving both time and operational costs.

Application Requirements and Conditions

To apply for a Cyprus CASP license, companies must meet several conditions covering incorporation, capital adequacy, key personnel appointments, and compliance management.

Corporate Registration and Legal Entity

  • Entity Type: The company must register as a Limited Liability Company (LTD) in Cyprus.
  • Physical Presence: A physical office in Cyprus is required to meet economic substance criteria.
  • Registration Documents: The application must include Articles of Association, a shareholder register, and a board member list.

Capital Requirements

  • Class 1: €50,000 minimum initial capital.
  • Class 2: €125,000 minimum initial capital.
  • Class 3: €150,000 minimum initial capital.

These funds must be deposited into a Cyprus-based bank account as part of regulatory verification.

Key Personnel Requirements

  • Board of Directors: At least four members, including two executive directors, with at least half residing in Cyprus.
  • Compliance Officer: An AML/KYC expert to oversee compliance operations.
  • Other Key Roles: Positions like Risk Manager and Financial Officer must be filled by qualified professionals.

All personnel must pass CySEC’s fitness and propriety checks, including submitting resumes, certifications, and criminal background checks.

Compliance Policies

  • AML/KYC Procedures: Businesses must implement robust policies for client identity verification, source of funds checks, and suspicious activity reporting.
  • Internal Controls: A comprehensive risk management and internal audit framework must be in place.
  • Economic Substance: Companies must demonstrate active operations in Cyprus, including hiring local staff and maintaining a physical office.

Application Process

The application process for a Cyprus CASP license involves the following steps:

  1. Company Incorporation:
    • Register a legal entity in Cyprus with an operational office and meet economic substance requirements.
  2. Key Personnel Appointments:
    • Appoint a minimum of four directors and other required personnel with the necessary qualifications.
  3. Bank Account Setup:
    • Open a Cyprus bank account and deposit the required capital.
  4. Document Preparation:
    • Submit key documents, including a business plan, AML/KYC policies, capital proof, organizational structure, and financial forecasts.
  5. Application Submission:
    • Submit the application to CySEC for preliminary review, address any feedback, and provide additional materials if requested.
  6. Final Approval:
    • Attend interviews if required and receive the CASP license upon regulatory approval.

Post-License Compliance and Operations

Once licensed, businesses must maintain high standards of compliance and operational transparency.

Financial Reporting and Auditing

  • Submit periodic financial reports prepared under International Financial Reporting Standards (IFRS).
  • Annual financial statements must be audited by an independent auditor.

Tax Compliance

  • Körperschaftssteuer: Declare income annually under the 12.5% corporate tax rate.
  • Crypto Trading: Follow EU tax guidelines for crypto transactions, ensuring accurate tax reporting.

Client Asset Protection

  • Segregation of Funds: Ensure client funds are held in separate accounts to avoid co-mingling with company assets.
  • Compensation Scheme: Establish client compensation mechanisms to protect against losses due to insolvency or other issues.

By adhering to CySEC’s regulatory requirements, companies can enhance their credibility and competitiveness in the global crypto market.

By strictly adhering to the operational and compliance requirements outlined above, businesses can not only operate smoothly in Cyprus but also establish a strong reputation in the international market. Fionza, a professional financial licensing service provider, assists global clients in maintaining compliance within complex financial environments, ensuring seamless business expansion. For any inquiries regarding the Cyprus Cryptocurrency License, Fionza offers comprehensive support and services.

With its stable regulatory framework, low tax policies, and in-depth understanding of the cryptocurrency industry, Cyprus has become an ideal registration destination for cryptocurrency enterprises looking to expand across Europe and globally. Whether seeking regulatory compliance, cross-border operational convenience, or tax optimization opportunities, the Cyprus Cryptocurrency License (CASP) provides robust support and market access for fintech companies. Through Cyprus’s legal and compliant framework, businesses can establish a long-term foundation for operations in European and global markets.

As an industry-leading financial consultancy, Fionza brings extensive experience and a global network to provide efficient and professional cryptocurrency licensing and operational compliance services. Whether you are a startup or an established financial institution, Fionza offers tailored solutions to help you successfully obtain the Cyprus Cryptocurrency License and steadily expand into international markets.

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