New CySEC Directive on Providers of Crypto Asset Services - Technology


Cyprus: New CySEC guideline on providers of crypto asset services

July 01, 2021

Nicholas Ktenas & Co. Ltd.

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The Cypriot Securities and Exchange Commission (the "CySEC") recently issued a guideline (RAD 269/2021) on the operating and registration conditions of crypto asset service providers (the"Directive"), after the latest implementation and enactment of the 5th AML directive. According to the directive issued by CySEC, the registration application for the register of crypto asset service providers owned by CySEC must be submitted to CySEC (future crypto asset service provider ) Name, address, trade name and legal form must be given in the application. The applicant will be informed by the Commission within six months from the date of submission of the application .

Registration requirements: The application for entry in the register will only be approved by CySEC if the applicant successfully fulfills all of the conditions listed below:

  • All essential documents and information are transmitted to CySEC.
  • People who fill an administrative position are highly competent and honest, have a positive image and a good reputation, have good skills, knowledge and a lot of experience and are willing to invest sufficient time in the tasks assigned to them.
  • At least four people form and represent the Board of Directors, two of whom are independent members and the remaining two manage the business.
  • The applicant owns and maintains a personal website without the likelihood of any other person operating and operating it.
  • Appropriate and pertinent policies and procedures will be put in place to ensure compliance with the Anti-Money Laundering and Terrorist Financing Law and Policy.
  • Internal control mechanisms are used to confirm previous operation and functionality.
  • The applicant has sufficient funds.
  • It ensures that the remuneration policy for individuals included in the provision of services to customers is focused on inspiring responsible and sensible behavior, treating customers fairly, and avoiding any type of conflict of interest in the relationship with a particular customer and Avoid any kind of conflict of interest from agreements in the form of sales targets, compensation or other similar things that could lead their employees to follow aggressive advertising practices for services and products.
  • Comprehensive governance precautions are in place with transparent and clearly identified and defined reference lines.
  • All necessary measures are taken to ensure the regular and uninterrupted conduct of its business activities and to maintain a relevant and updated policy to confirm its uninterrupted functions and processes for the purpose of retrieving data and timely continuation of its activities in the event of interruptions become.
  • The applicant maintains sound accounting and administrative procedures, effective risk assessment procedures, internal control mechanisms and effective security and control mechanisms for the data of the electronic processing system.
  • An internal audit will only be established and maintained if it is suitable and compatible with regard to the complexity, scope and type of the company, which is independent and separate from the other operations.
  • Adequate security mechanisms are in place to ensure the security of the information passage or medium, limit the risk of data corruption along with unauthorized access, and prevent critical information from being leaked before it is published, in order to maintain the confidentiality of the data at all times.
  • It ensures that the records are kept in accordance with all the operations and functions it performs, taking into account the relevant notification so that the Commission can carry out its supervisory duties.
  • The applicant confirms that workers will only perform multiple tasks if the simultaneous performance of multiple tasks does not prevent or hinder them from doing their job with professionalism, sincerity and conscientiousness.
  • Relevant policies and procedures are in place to ensure that potential complaints from its customers are properly resolved.
  • It is ensured that the people deployed have the necessary knowledge depending on the tasks assigned to them.

Capital requirement: It is essential for crypto-asset service providers to have sufficient equity capital that is at least equal to the larger of the amounts listed below:

I. the initial capital indicated in the Annex to the Directive, appropriate to its activity and nature;

ii. 25 percent or a quarter of the fixed costs of the crypto asset service providers in the previous year. The provision of this paragraph shall come into effect as follows:

on) From January 1, 2022, 30% of the applicable amount;

B.) From January 1, 2023 60% of the applicable amount;

C.) From January 1, 2024 100% of the applicable amount;

Fees and Subscriptions: Applicants are required to pay € 10,000 when submitting their application, which will not be refunded if the application is rejected. The annual renewal of the entries in the register is € 5,000.

The content of this article is intended to provide general guidance on the subject. Expert advice should be sought regarding your specific circumstances.

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