Over the past few years, there has been an overwhelming effort to set some rules for the cryptocurrency industry around the world. The country of Cyprus not only enables but encourages the growth of fintech platforms, setting itself among the pioneers of crypto technology. In this article, we will have a closer look at this particular regulation in Cyprus. 

What is CASP license and how getting one will affect the applicant's business?

Over the past few years, there has been an overwhelming effort to set some rules for the cryptocurrency industry around the world. The country of Cyprus not only enables but encourages the growth of fintech platforms, setting itself among the pioneers of crypto technology. In this article, we will have a closer look at this particular regulation in Cyprus. 

What is CASP license and how getting one will affect the applicant's business?

CASP (Crypto-Asset Service Provider) is a license that is issued by the Cyprus Securities & Exchange Commission - CySEC. It can be granted to legal entities and natural persons that provide services in the field of digital asset management. Cyprus doesn’t consider virtual assets as legal tender, even though they are commonly used in transactions with other digital or physical assets. To put it simply: They are just traded.

This license is valid in all 27 states of the European Union. It is considered to be a preparation of the Cypriot authorities for the expected 2025 regulation coming from Brussels along with the launch of the Markets in Crypto-Assets (MiCA) regulation.

See what CASP allows a company to do in a regulated environment:

• crypto-to-fiat & crypto-to-crypto exchange
• cryptocurrency asset management
• sale & purchase of cryptocurrency assets
• transaction settlements on a centralized platform
• other activities associated with digital asset management

What conditions must the applicant meet?

CASP licenses are not being handed out just yet. Mainly because CySEC is pursuing unification with the requirements laid out by the European Markets in Crypto-Assets (MiCA) legislation. This piece of legislation is currently in the final straight, therefore we are already fairly familiar with the precise conditions that the Cypriot commission is about to enforce.

However, the ministers of the member countries will have the final say. Some of them are indeed not afraid to go against the will of the European Parliament, though nothing is set in stone yet.

When granting a license, CySEC will specifically focus on:

Sufficient capital to operate

A company applying for CASP is required to have adequate operating capital depending on the type and scale of services it intends to provide – the range is set between €50,000 and €150,000

Competence of the director and others involved

The director, business participants, and key managers will be subjected to an in-depth analysis to see if they are capable of running the company under the CASP license. In addition, officials check the reputations of the people involved and rigorously search through various public records. Knowledge of cryptocurrencies or financial responsibility is also a must. The local regulators leave nothing to chance.

Composition of the company's governing bodies

The board of directors must consist of at least 4 people. One couple is in charge of the executive. The second pair are independent consultants, they sit on the chairs of the board of directors and thus hold strong power in the decision-making process of the company. Everyone on the board must – again – demonstrate competence.

Links to third parties

Great emphasis is placed on the prevention of corruption and other financial crimes. Each license applicant is analyzed in detail to see if there is any potential conflict of interest between him and the authorities.

Money laundering prevention

For example, the application of the "travel rule", which is a group of individual restrictions that greatly interferes with the pseudo-anonymity of virtual assets. Every cryptocurrency service provider in the European Union must check who owns a wallet outside of a centralized entity and link a specific transaction to a specific person, not just a wallet’s address.

Perfect company management

The authorities will carefully go through every document and any piece of viable information they can get their hands on about the applicant. Just a single error indicating corruption or an attempt to circumvent the rules can result in the license being denied. Administrative documents, accounting statements and other evidence regarding the activities of the company must be available at any time upon request.

This also goes hand in hand with the fact that the CASP licensee has an obligation to guarantee the security of its clients' private data.

Overview of third parties cooperating with the applicant

If the applicant has suppliers of technology or various services, another check will take place to see if these suppliers are not considered a danger to the citizens of the European Union (sanctions lists, etc.)

Want to discuss a Crypto-Asset Service Providers license?

You can find more information in our article, where we cover MiCA in more detail! If you like this topic and would like to get involved in the discussion, then join our Telegram!