Crypto Currency Exchange License in Cyprus

Blockchain technologies can revolutionize many areas of the economy and have a high integration potential. Experts believe that the ratio of risks to benefits outweighs in favor of undeniable advantages – accounting systems for new digital entities allow all economic sectors of states literally to improve and develop. The regulation of blockchain technology and cryptocurrencies in Cyprus still needs to be completed. However, the republic’s authorities are taking measures and creating a unified regulatory mechanism to assign official legal status to digital assets. The presence of a regulatory framework will allow regulation of the activities of financial and payment companies, brokers and traders at the state level.

Today, the island nation is on the list of the most attractive countries for organizers of fintech companies using blockchain technology. The country’s authorities are showing an increased interest in smart contracts with the subsequent expansion of their scope. Integrating the blockchain into the state system is the initial stage that will allow Cyprus to create the most favorable atmosphere for initiators and foreign investors with plans to conduct activities in the field of crypto assets. Any Cypriot company that wants to run a cryptocurrency-related business must apply for a license from CySEC. The licensing procedure in Cyprus is more complex, but there are many advantages to a crypto license Cyprus. You can learn more about all the nuances of obtaining consent and registering activities in Cyprus later in this article.

Licensing Rules in Cyprus

Any resident of the European Union can apply for a local license. However, it is worth remembering that the approval process includes many checks. Any company that plans to provide services related to digital assets must comply with the requirements established by local law. Any violation of the established norms may result in the loss of the CASP license.
  • First and foremost, crypto companies must develop appropriate internal policies to combat money laundering and terrorist financing.
  • Each new client of the company must be identified. Personal information must be supported by relevant documents and must be regularly updated.
  • Also, crypto companies must keep internal records and regularly assess all the risks associated with their activities.
  • All suspicious transactions must be further verified, including every significant cryptocurrency transaction.
  • The company must appoint one or more representatives responsible for checking all the above points, regularly informing customers, and updating data.
  • All employees must receive regular training and be aware of the risks and responsibilities associated with any illegal activity related to money laundering.
The compliance, as mentioned earlier, requirements apply to all transactions involving digital assets.

Benefits of Obtaining a Cryptocurrency License in Cyprus

Cyprus enjoys undeniable popularity among all cryptocurrency companies. Clear and loyal legislation is one of the main factors in choosing a jurisdiction for obtaining a cryptolicense. The licensing system is much better than any other European license. Service providers can choose from dozens of activities, including a different document package and a licensing process. Thus, a crypto company may only spend time obtaining approval in areas where it does not plan to work. Also, it is worth noting that some licenses are additionally divided into levels. It allows you also to consider the company’s rank and indicate high achievements. Another significant advantage is the taxation procedure. 

It is important to note that the country has some of the most loyal taxes on financial companies, particularly crypto companies. We bring to your attention four main advantages of a crypto license in Cyprus:
  • There are no restrictions on mining.
  • Opportunity for owners to manage the company remotely.
  • Lower tax rates than in most European countries.
  • Simplified opening of an account with the Central Bank.

Requirements for Obtaining a Crypto License Cyprus

Despite the vast list of advantages and very loyal legislation, companies must still meet many needs:
  • The company must be registered in Cyprus. Also, the board of directors must consist of 4 or more people. The duties of the executive director must be carried out simultaneously by two people. All members of the board of directors must prove their knowledge and skills in service delivery and be additionally approved by CySEC. Approval can only be obtained after appropriate testing in this area.
  • An additional body should be created within the company to monitor the proper performance of all duties and control the quality of services provided.
  • Also, procedures should be developed to avoid money laundering and fraud financing violations.
These are the central norms and requirements. However, different standards may be put forward that must be observed depending on the company’s activities.

Cyprus Crypto License Capital Requirements

Obtaining a license is sometimes referred to as authorization. There are three primary levels of permission within the Cyprus Jurisdiction. The level can be determined by the volume of services the company plans to provide its customers. Each level has different capital requirements.

1 Class License

It is a start-up category that includes investment advisory companies. The initial capital, in this case, should be 50,000 euros.

2 Class License

In this case, companies can provide advice and exchange cryptocurrency for fiat currency, manage a cryptocurrency portfolio, supply and distribute digital assets, and place crypto assets without fixed liability. A company must have an initial capital of at least 125,000 euros to obtain such a license.

3 Class License

In this case, companies can perform administrative operations in addition to the functions of licenses one and two. These powers include the custody of crypto-currency assets and their transfer of ownership. Also, having this crypto exchange license Cyprus, the company can carry out transactions involving several parties. Companies receiving such permission must have an initial capital of 150,000 euros.

The Process of Setting Up a Company in Cyprus

Before applying for an activity license, it is necessary to establish a company in Cyprus. In this case, an individual must go through all the stages, from collecting documents to finding a unique name. An application for company registration is submitted to the Registrar of Companies of Cyprus. A decision on whether to allow the registration will be made within five days of the submission of the application. detecting and reporting any suspicious transactions that may occur. Ensure the company complies with all international regulations and requirements in Cyprus. The expected time for preparing the application and supporting documents is about 1-2 months, depending on the availability of the necessary documents

Appointment of Persons to Leadership Positions

Appointment of Persons to Leadership Positions According to the established requirements, at least one of the executive directors must reside in Cyprus and have permanent residence in the country. For executive directors, a unique test is additionally assigned for compliance with all the norms and standards of the jurisdiction of Cyprus. It allows all employees who hold important positions in the company to pass a suitability test and confirm their experience and knowledge in the field of the Cyprus cryptocurrency market. To appoint a person to a position, a particular application is submitted. KASP approved the form of this document. Along with the application, the company must provide the following:
  • A set of corporate documents of the company, including the certificate of incorporation, certificate of appointment of executive directors, memorandum, and so on.
  • Detailed information about the state of the company’s capital, including all sources of profit.
  • Management that operates within the company to combat money laundering.
  • Business plan, including financial forecasts for one year.
The application can be considered up to 6 months from the submission date.

CYSEC Application Fee

The company pays a standard fee of 10,000 euros at the time of application. In case of rejection of the application for a license, this fee is not refundable. If the application is approved, the company undertakes to pay an annual license renewal fee of 5,000 euros.

Registration of Structural / Internal Changes

Any change in the activities of the company must be additionally registered. The company undertakes to notify the licensing authority about a difference in the address of a cryptocurrency wallet, website updates, or changes in services related to the company’s activities. Also, it is necessary to register each employee who will hold a high-ranking position in the company, for example, board members. The cost of writing any of these changes can range from 1,000 to 5,000 euros.

Taxation of Cryptocurrency Projects in Cyprus

One of the main advantages of licensing crypto-currency activities in Cyprus is low taxes. All cryptocurrency areas of activity are subject to standard rates. Cryptocurrency trading income is currently taxed at a rate of 12.5%. The tax is deducted exclusively from income. At the same time, income is reduced by the number of expenses in earning income. Therefore, payments are not taken into account when calculating tax.

The Cost of a Cryptocurrency License in Cyprus

When applying, the company pays a fee of 10,000 euros. However, most crypto businesses need help. You can turn to professionals who will help you register a company in Cyprus and apply for a license. The cost of such services is, on average, 25,000 euros.

FAQ

Yes. To apply for a license, a company must be registered in Cyprus and comply with the regulations of the licensing authority.

It is necessary to draw up a business plan, prepare all documents, pay 10,000 euros, and submit an application.

The license in Cyprus is divided into three levels. Each level allows different activities, from investment advice to holding and selling cryptocurrency assets.

One of the executive directors must reside in Cyprus and have permanent residence.

Yes. In this case, the rule that one of the executive directors is a resident of Cyprus must be observed.