With reference to the above-mentioned subject, we would like to bring to your attention the Directive (R.A.D. 269/2021) which has been issued by the Cyprus Securities and Exchange Commission (the “CySEC”) on the 25th of June, 2021 as per article 61E of the Prevention and Suppression of Money Laundering and Terrorist Financing Law, L.188(I)/2007 (the “AML Law”).
Through the Directive, CySEC informs CIFs and interested parties of the following:
- The Directive has come into force with its publication in the Official Gazette of the Republic.
- Register of Crypto Asset Service Providers “CASPs”
✓ Establishes and maintains this Register in its website.
✓ Publishes the following information:
- name, trading name, legal form and registration number (legal entity ID)
- the registered address;
- the official website
- the services provide or carry out one or more of the following:
- exchange between crypto-assets and legally circulating money (i.e., fiat currency);
- exchange between crypto-assets;
- Management, transfer of crypto assets; custodial and/or administrative services related to crypto assets or instruments enabling control over crypto assets;
- Offering and/or sale of crypto-assets, including the initial offering; and
- participation and/or provision of financial services regarding to the distribution, offer and/or sale of crypto -assets, including the initial offering.
▪ “Crypto asset” means: an asset with a digital value, which is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally currency and does not have a legal status of currency or money, but is accepted by persons as a means of transaction or investment, may be transferred, stored or traded electronically and is not:
- a fiat currency;
- electronic money;
- financial instruments.
- Registration Procedure
- The Register is mandatory for:
✓ CASPs providing or carrying out services or activities from Cyprus, regardless of their registration in a relevant registry of another EU Member for these services.
✓ CASPs providing or carrying out services or activities to Cyprus, except for businesses that have already registered in a relevant registry of another EU Member state for these services.
- Each CASPs
✓ shall complete the application from as issued by CySEC:
- Along with the data shown in Part 2;
- Along with the details for the services provide/carry out;
- In Greek or English language;
- Original or duly certified .
✓ must notify CySEC of each change in the information submitted;
✓ may authorizes a representative person for the Company.
- CySEC informs the applicant and/or the authorized person within six (6) months from the submission of application for registration or not in the Register.
- Conditions of Registration
- CySEC approves the application when (please refer to paragraph 6 of the Directive for more details):
- CASPs has submitted all the information as per Part 2 and 3.
- All person holding a management position* in a CASP is competent and trustworthy, with the below characteristics:
- “Good reputation” means the integrity and ethos of the person and documented if there is no reliable evidence to indicate the opposite (as example for “integrity” are a conviction for a related offense to the detriment of the person or to the detriment of his accomplice, prosecution for committing a relevant offense against the person or against him of his accomplice etc/ for “ethos” are any indications that it was not transparent, open and cooperative its transactions with supervisory or regulatory authorities etc)
- Knowledge” means the existence of academic degrees or professional qualifications or any of the above combined with continuous training, on the cumulative basis of which the CySEC is satisfied with the existence of suitable knowledge.
- Skills and experience” mean the abilities of the person in the field of management (“administrative competence”) and,
- based on the person’s previous experience in relevant administrative positions
- the abilities of the person in the field of services which exercised by the CASP or in a related field (“technical competence”).
- based on the person’s previous experience in matters that concerning the operation and management of financial institutions or the provision of investment or other related services as appropriate skill, care, diligence and compliance with relevant standards.
- In the case of the Board of Directors, the Board of Directors of the applicant consists of at least four (4) persons who meet the requirements of point (b), of which two (2) to direct the business activities of the CASPs and two (2) be independent members.
- A beneficiary (“UBO”) ** in a CASP is required to be competent and trustworthy, as following.
- “Good reputation” means the integrity and ethos as point b, above;
- “Ability to maintain the robust financial structure” of CASPs, meaning the UBO should have sufficient financial strength to ensure sound and prudent management of CASPs in the foreseeable future (usually three years), for which must be satisfied by the CySEC.
- As per the amending AML Law
- CySEC assesses the competency and trustworthiness of persons holding an administrative position in a CASPs and UBO in accordance with the criteria and procedure laid down above.
- Persons holding a “management position”* means the natural persons who constitute the board of directors of an obliged entity and / or performing the executive functions in it, who are responsible and accountable to the administration board for its day-to-day management.
- “Beneficiary of CASP”** means a natural or legal person who, individually or in consultation with other persons, holds, directly or indirectly, in
(a) special participation; or (b) a holding based on which the proportion of rights voting stock or shares it holds to reach or exceed the threshold of twenty percent (20%), thirty percent (30%) or fifty percent (50%); or (c) a holding under which the CASP becomes a subsidiary business of that person. “Special participation ”means direct or indirect participation in CASP: (a) represents at least ten percent (10%) of it capital or the rights of the CASP. (b) allows it to exercise significant influence over management of the CASP, in which the said participation exists
- The close links between the applicant and other natural or legal persons do not hinder its effective monitoring, evaluation and monitoring of CYSEC, i.e., in the event that the natural or legal person with whom the applicant has a close relationship is in a Third Country.
- Establishes appropriate policies, procedures to ensure:
✓ its compliance with the AML Law detection
✓ avoidance or management of conflicts of interest
✓ the correct resolution of customer complaints
- Establishes systems and control mechanisms for ensuring the prudent operation of CASP, including minimizing the risk of theft or loss of crypto assets of its customers.
- Holds own funds , at least equal to greater than the following (refer to paragraph 14 and Appendix of this Directive for more details):
✓ the amount of the initial capital, depending on their nature its functions and activities as per below summarized table CASP Services Initial Capital
CASP that provide investment advice
CASP that provide investment advice as per Category 1 and / or any of several other services
CASP that provide investment advice as per Category 1 or 2 and / or any of several other services
✓ one quarter (1/4) of the fixed expenses of the CASP during the previous year, subtracting the following items:
▪ additional staff remuneration and other remuneration,
▪ profit sharing of employees, managers, and partners
▪ other profit distributions and other variable remuneration, to the extent that they are made at its sole discretion;
▪ non-recurring expenses from unusual activities.
✓ The provisions shall enter into force from 1st January 2022, as follows:
▪ 30% of the relevant amount from the 1st of January 2022;
▪ 60% of the relevant amount from the 1st of January 2023;
▪ 100% of the relevant amount from the 1st of January 2024.
- Ensures that the persons employed in it do not exercise multiple duties unless the exercise of multiple duties does not prevent nor is it likely to prevent such persons from carrying out any work or function with diligence, honesty and professionalism.
5. Conditions of withdrawal
- As per the amending AML Law, CySEC may delete registered CASPs from the Register; on the basis of the below conditions (paragraph 7 of Directive):
- does not provide services to Crypto Assets for a continuous period of six (6) month·
- has been entered in CASPs’ Register on the basis of false declarations or by any other irregular way;
- has terminated all its services and activities as specified above in Part 2, provided the fulfilment of several conditions as per the relevant procedure for the deletion (please refer to paragraph 8 of Directive for further details);
- no longer falls under the categories of obliged entities for registration in the CASPs’ Register.
6. Conditions of Suspension
- As per the amending AML Law CySEC may suspends CASPs registration, on the basis of the below conditions and conditions (section 9 of Directive):
- For the correction of information, for a reasonable period of time, if the information in the Register that is accessible to the public under Part 2 is inaccurate and / or incomplete.
- CySEC provides a maximum period of seven (7) days for the correction of the relevant information and / or to provide explanations to CySEC.
- For suspicion of non- compliance with the conditions of registration, immediately and without any other notice or procedure.
- CySEC provides a maximum period of fifteen (15) days to comply.
- During the suspension period,
- CASPs has to post on all its websites a relevant announcement regarding the suspension of its registration and its inability to provide services and activities, while the CySEC includes a relevant mark in the Register of CASPs.
- CASPs is not allowed:
- To provide or carry out services or activities related to cryptocurrencies data;
- enter into a business relationship with any person and accept any new customer;
iii. be advertised as a PCS, registered in the Register maintained by the Commission Capital Market.
- CASPs is allowed only if its existing customers so wish:
- To complete all unresolved transactions, as per the instructions of the clients;
- return all funds and crypto assets to its customers;
iii. to transfer existing contracts to another CASPs following instructions from its clients, unless it has received other instructions from CYSEC.
- Change of Information
- As per the amending AML Law CASPs should inform CySEC for any amendments of information as following (paragraph 9 of Directive):
- In case of changes in the following information, the CASPs submits a request to CySEC for the modification of its entry in the Register within one month from the date that the change occurred and CySEC proceeds to update the information within three (3) days of receiving the request:
- name, trading name, legal form and registration number (legal entity ID);
- the registered address.
- In case of changes in all other information as shown in the official website of CySEC, as above in Part 2, this constitutes a substantial change and its implementation requires the prior notification of CySEC to obtain approval (refer to paragraph 12 of Directive).
- Fees and Subscriptions
- For the purposes of examining the application for registration in the Register pays to the CySEC a fee of 10,000 euros
- If the application for registration is approved by the CySEC, the CASPs does not pay any fee or subscription to CySEC for the first year of its registration.
- In case the application for registration in the Register is not approved by the Hellenic Capital Market Commission, the fee paid by the PYKS is not refundable.
- For the purpose of renewing the registration in the PCS Register for a period of one (1) year pays a subscription of 5,000 euros.
- For the submission of a notice of substantial change, a fee shall be paid between 1.000 – 5.000 Euro (refer to paragraph 16 of Directive for further details).