cryptocurrencies Tag

by Andria Papageorgiou

How to Register with CySEC as a Crypto Asset Service Provider (CASP)?

The Cyprus Securities and Exchange Commission (CySEC) functions as the autonomous regulatory body overseeing the investment services market, collective investment, asset management sectors, as well as crypto-asset activities within and beyond the Republic of Cyprus. CySEC’s mission is to position the Cyprus securities market as a premier destination for investment, renowned for its security, reliability, and attractiveness.

Acting as the national authority responsible for Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT), CySEC governs Crypto-Asset Services Providers (CASP) offering services within or from Cyprus.

On September 13th, 2021, the CySECreleased a Policy Statement concerning the Registration and Operations of CASP. This statement details the registration criteria and offers further guidance on the process for becoming a registered CASP.

Submission of an application for registration in the Register of CASP:

For a complete application, the below information will be needed:

1. The name, trade name, legal form and legal entity identifier of the CASP;
2. the physical address of the CASP;
3. the services provided and/or the activities that the CASP may carry out as defined below.
4. the website of the CASP.
5. the crypto-assets’ addresses of the CASP;
6. the crypto-assets in relation to which the CASP provides services or exercises activities;
7. the types of clients the CASP services;
8. information as to whether the CASP offers payment services in crypto-assets;
9. information as to whether the CASP operates crypto-assets ATMs, the number and the exact location thereof;
10. the geographic jurisdictions in which the CASP operates; and
11. information as to whether the CASP is registered or supervised in any other jurisdiction.

The documents and data are submitted in the official language of the Republic or in English and are originals or, where this is not possible, they are true copies of the originals. In case that the documents and data are produced in a language other than the official language of the Republic or in English, their true translation is also submitted.

List of Forms and Questionnaires for registration:

1. Form 188-01: Application for CASP Registration and for Amendment of Registration;
2. Form 188-02: Personal Questionnaire for CASP Beneficiaries – Natural Persons;
3. Form 188-03: Personal Questionnaire for CASP Beneficiaries who are Legal Persons;
4. Form 188-04: Personal Questionnaire for CASP Beneficiaries who are Trusts;
5. Form 188-05: Personal Questionnaire for Persons Holding a Management Position;
6. Form 188-06: List of Persons Holding a Management Position;
7. Form 188-07: NotificationForm for EEA CASPs.

Crypto Asset Services:

Crypto Asset Service Providers are able to operate through varying business models due to the different combinations of crypto-asset activities and services that can be generated, based on the company’s business plan and vision. CASP are categorised into three classes according to the crypto-asset services offered:

Initial Capital Requirements:

The initial capital requirements differ depending on the various classes of CASPs, as outlined in the table provided below.

Board of Directors:

In the case of the Board of Directors, the Board of Directors of the applicant is comprised of at least 4 persons who meet certain requirements (i.e. good reputation, experience, skills, etc.), 2 of which must direct the business activities of the CASP and 2 must be independent members.

Required Policies:

1. Business Plan;
2. Anti-Money Laundering Manual;
3. Internal Operations Manual (IOM);
4. Travel Rule Book;
5. Remuneration Policy;
6. Corporate Governance (if not included in the IOM);
7. Business Continuity Plan and Disaster Recovery Policy;
8. Outsourcing Policy (if not included in the IOM);
9. Accounting Procedures (if not included in the IOM);
10. Risk Management Policy;
11. IT and Security Policies;
12. Complaints’ Handling Policy;
13. Legal Documents which will be accessible and available at all times on the website of the CASP licensed entity (i.e. Terms and Conditions).

Applications Fees:

Fees payable to the Cyprus Securities and Exchange Commission for the examination of the registration application are standard and independent of the services intended to be offered. The fee is 10,000 EUR. Where the application for the CASP registration is approved the CASP is not required to pay any additional fees to CySEC for the first year of its registration.

Annual Fees:

Annual fees payable to the Cyprus Securities and Exchange Commission for the renewal of the CASP registration for one year, are standard and independent of the services offered by the CASP. The applicable fee is 5,000 EUR from year 2 onwards.

Licensing Timeframe:

Although the relevant regulatory framework specified that CySEC shall inform the applicable within 6 months from the submission of a fully completed application, in our experience, the CASP registration procedure can be concluded in 12 months, in anticipation of CySEC’s varying workload and the applicant’s preparedness on reverting back with the information and documents requested.

Andria Papageorgiou Law Firm:

Our Firm comprises top-tier professionals dedicated to assisting both new and established CASPs offering crypto asset services in or from Cyprus with their registration process. Our team handles everything from gathering the necessary information to preparing and submitting a complete application package to CySEC, ensuring a smooth and efficient registration process on your behalf.

Once your registration is completed, our Firm stands ready to collaborate closely with you to ensure compliance with all regulatory obligations. We offer a wide array of post-registration services tailored to your specific needs.

Furthermore, for EEA-established CASPs already registered with their national competent authority, we assist in submitting the requisite notification form to CySEC, along with the necessary evidence regarding crypto asset services conducted or intended to be conducted in Cyprus.

It’s worth noting that our Law Firm has extensive experience in CASP registration, having successfully achieved the registration of a CASP-licensed entity, placing among the first 10 entities with a CASP license.

Should you have any further questions, please do not hesitate to contact us at [email protected].

Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as financial or investment or legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information. 

by Andria Papageorgiou

Updates surrounding Markets in Crypto-Assets Regulation (MiCA)

Following the recent approval of the Markets in Crypto Assets Regulation (the “MiCA”) in June 2023 and the corresponding implementing measures that needs to be prepared, we would like to draw your attention on the following news and press releases published by the European Banking Authority (the “EBA”) and the European Securities and Markets Authority (the “ESMA”) on the 12^th of July 2023:

A. EBA’s publications:

1. Consultation Paper on Complaints handling procedures for issuers of asset-referenced tokens (EBA/CP/2023/13);
2. Consultation Paper on information for the assessment of a proposed acquisition of qualifying holdings in issuers of asset-referenced tokens under MiCA (EBA/CP/2023/14);
3. Consultation Paper on EU market access of issuers of asset-referenced tokens (EBA/CP/2023/15); and
4. Statement on timely preparatory steps towards the application of MiCA to asset-referenced and e-money tokens.

B. ESMA’s Consultation Paper:

1. Consultation Paper on Technical Standards specifying certain requirements of MiCA (ESMA74-449133380-425)

In brief, allow us to summarise the following:

A. EBA’s News and Press: 

1. Consultation Paper on Complaints handling procedures for issuers of asset-referenced tokens (EBA/CP/2023/13):

• Scope: To ensure prompt, fair and consistent handling of complaints by holders of asset-referenced tokens (the “ARTs”) and other interested parties.
• Main Provisions: It sets out definitions of complaints and complainants, requirements related to the complaints management policy and function, provision of information to holders of ARTs and on templates and recording. They then proceed with requirements about the procedure to investigate complaints and to communicate the outcome of the investigations to complainants and specific provisions for complaints handling involving third-party entities.
• Next Steps: Comments to the Consultation Paper EBA/CP/2023/13 can be sent by clicking on the “send your comments” button on the EBA’s consultation page. The deadline for the submission of comments is on the 12^th of October 2023.

2. Consultation Paper on information for the assessment of a proposed acquisition of qualifying holdings in issuers of asset-referenced tokens under MiCA (EBA/CP/2023/14):

• Scope: To regulate access to the EU market of ARTs by applicant issuers and persons intending to exercise significant influence on these undertakings via the acquisition of qualifying holdings.

• Main Provisions:

• • Under MiCAR, the offer to the public or the admission to the trading of an ART is reserved for legal persons or other undertakings established in the EU subject to the authorisation and approval of the publication of a white paper. The draft RTS on information for authorisation lay down the information requirements to be included when applying for such an authorisation. The information requirements cover the business model, and internal governance, including ICT risk management, liquidity, the reserve of assets, sufficiently good repute of the members of the management body, and of shareholders with qualifying holdings.
  • The draft ITS set out the standard application letter, and the application template and clarify the process relating to the assessment of completeness of the application by the competent authority. As credit institutions are only required to receive approval to publish a white paper, the draft RTS and ITS do not apply to credit institutions.
  • Consistent with the general regime applicable in the financial sector, MiCAR envisages a prudential assessment by competent authorities for the acquisition of qualifying holdings in issuers of ARTs that are not credit institutions. The draft RTS on the detailed content of the information to be included in the notification for the proposed acquisition clarifies the information requirements that are necessary for such an assessment.
  • This information covers five criteria relating to (a) the reputation of the proposed acquirer, (b) the suitability of any person who will direct the target undertaking, (c) the financial soundness of the proposed acquirer, (d) the sound and prudent management of the target undertaking following the acquisition and (e) suspicion that money laundering or terrorist financing is committed or attempted or that it may increase following the acquisition.

• Next Steps: Comments to the consultation paper can be sent by clicking on the “send your comments” button on the EBA’s consultation page. The deadline for the submission of comments is 12 October 2023.

3. Statement on timely preparatory steps towards the application of MICA to ART and e-money tokens (the “EMT”):

• Scope: To encourage timely preparatory actions to MiCA application, with the objectives to reduce the risks of potentially disruptive and sharp business model adjustments at a later stage, to foster supervisory convergence, and to facilitate the protection of consumers.
• Content:
  • The Statement includes ‘guiding principles’ to which financial institutions (and other undertakings) carrying out ART/EMT activities are encouraged to have regard until the application date (disclosures to, and fair treatment of, potential acquirers and holders of ARTs and EMTs, the business model, sound governance, including effective risk management, reserve, recovery and redemption arrangements, and communications with the relevant competent authority).
  • The Statement is accompanied by a template that financial institutions (and other undertakings) intending to carry out, or carrying out, ART/EMT activities, are encouraged to communicate, on a timely basis, to the relevant competent authority.

B. ESMA’s Consultation Papers:

Same-day press release publication by ESMA,  in relation to the lunch of the first of three consultation packages (the “ESMA’s Consultation Paper”), on the technical standards specifying certain requirements.

• Scope: Through the aforesaid consultation paper, ESMA is seeking input on proposed rules for CASPs related with their authorization, identification and management of conflicts of interest as well as the procedures on how CASPs should address complaints. The ESMA’s Consultation Paper‘s aim is to collect views, comments and opinions from stakeholders and market participants in regard to the appropriate implementation of MiCA.

• Main Provisions:

• • Provision of crypto-asset services by certain financial entities – Article 60

Specifies the notification requirements, that certain financial entities intended to provide crypto-asset service and for which they shall take into account when submitting the notification to the NCA of their home Member State (e.g. program of operations, description of the internal control mechanisms relating to AML/CFT obligations, description of the procedure for the segregation of clients’ crypto-assets and funds, etc.)

• • Content of templates for the application for authorisation – Article 62

Sets out the requirements related to the application for the authorisation as a CASP as well as the information to be provided with the application that shall be submitted to the NCA of their home Member State. (i.e. program of operations, description of CASP’s governance arrangements, description of the procedure for the segregation of clients’ crypto-assets and funds, etc.).

• • Complaints-handling procedures of CASPs – Article 71

Provides the requirements that CASPs shall follow when establishing and maintaining effective and transparent procedures for the prompt, fair, and consistent handling of complaints received from clients (i.e. filing a free-of-charge complaint by the client).

• • Identification, prevention, management, and disclosure of conflicts of interest by CASPs – Article 72

Clarifies the policies and procedures that CASPs shall implement and maintain so as to be able to identify, prevent, manage and disclose any conflict of interest and disclose to their clients the general nature and sources of conflicts of interest as well as the steps that shall be taken to mitigate them.

• • Assessment of intended acquisition of a qualifying holding in a CASP under Article 83(4)

Natural/Legal person who intends to acquire or increase a qualifying holding in a CASP shall notify the respective NCA through an assessment with the specific information in order for the relevant NCA to assess the proposed acquisition or increase the existing qualifying holding.

• Next Steps: Comments to the ESMA’s Consultation Paper can be sent by clicking the heading ‘Your input – Consultations’. The deadline of the submission of the responses/comments is on the 20^th of September 2023.

Should you have any further questions, please do not hesitate to contact us at [email protected].

Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as financial or investment or legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information. 

by Andria Papageorgiou

Regulation on Markets in Crypto-assets: Navigating the Evolving Landscape

A. Introduction:

In recent years, the rapid growth of cryptocurrencies and the emergence of blockchain technology have led to a significant expansion of the crypto-assets market. This growth, while exciting, has also raised concerns regarding investor protection, market integrity, and financial stability. As a result, regulatory authorities around the world have been striving to develop comprehensive frameworks to regulate markets in crypto-assets. This article aims to explore the evolving regulatory landscape and its implications for market participants.

B. The Global Context:

Crypto assets, including cryptocurrencies and tokenized assets, operate in a borderless digital environment, posing challenges for traditional regulatory frameworks. Recognizing the need for regulatory clarity, several jurisdictions have taken proactive steps to establish frameworks that balance innovation with investor protection.

One notable initiative is the European Union’s proposed Regulation on Markets in Crypto-assets (MiCA). MiCA aims to create a harmonized regulatory framework for crypto-assets and related service providers within the EU. The regulation seeks to enhance transparency, protect consumers, and foster market integrity while promoting innovation.

C. Key Provisions of MiCA:

1. Classification and Authorization: MiCA introduces a comprehensive classification system for crypto-assets, distinguishing between e-money tokens, asset-referenced tokens, and significant or non-significant tokens. It also establishes a licensing regime for crypto-asset service providers, ensuring they meet strict operational and governance standards.
2. Market Conduct and Investor Protection: MiCA sets out rules on the marketing, sale, and provision of crypto-assets and related services. It aims to enhance investor protection by requiring clear and accurate disclosure of risks, imposing conduct of business obligations on service providers, and establishing safeguards against market abuse and fraud.
3. Operational Requirements: The regulation imposes operational requirements on crypto-asset service providers, including capital requirements, custody rules, and risk management obligations. These provisions aim to ensure the security and resilience of market infrastructure and protect customer assets.
4. Cross-Border Passporting: MiCA introduces a mechanism for cross-border passporting, allowing authorized service providers to operate across EU member states without the need for additional authorizations. This harmonization is expected to foster competition, facilitate market access, and streamline regulatory compliance.

D. Challenges and Opportunities:

Implementing regulations on markets in crypto-assets is a complex task, requiring a balance between regulatory oversight and fostering innovation. Challenges include addressing the inherent volatility of crypto-assets, the risk of money laundering and terrorism financing, and the need for international cooperation.

However, clear and consistent regulatory frameworks can also bring opportunities. Regulatory certainty can attract institutional investors, encourage responsible innovation, and provide a level playing field for market participants. It may also help mitigate systemic risks associated with the growing interconnections between traditional financial systems and crypto-assets.

E. Conclusion:

The regulation of markets in crypto-assets is an ongoing and dynamic process, driven by the need to protect investors, maintain market integrity, and foster innovation. Initiatives like MiCA demonstrate a commitment to providing legal clarity and regulatory oversight within the European Union. As the global regulatory landscape continues to evolve, it is essential for market participants to stay informed, adapt to changing requirements, and engage in constructive dialogue with regulators to shape the future of this exciting and transformative market.

Should you have any further questions, please do not hesitate to contact us at [email protected].

Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as financial or investment or legal advice on any matter. It is important to conduct thorough research and consult with financial professionals before making any investment decisions related to cryptocurrencies or digital banking. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information. 

by Andria Papageorgiou

Cryptocurrencies: Evaluating Risks and Assessing Their Future in Digital Banking

A. Introduction:

The emergence of cryptocurrencies has disrupted traditional financial systems, offering decentralized and secure alternatives to conventional banking. However, as with any financial innovation, cryptocurrencies come with inherent risks. In this article, we will delve into the risks associated with cryptocurrencies and explore their potential future in the realm of digital banking.

B. Cryptocurrency Risks:

1. Price Volatility: One of the primary risks associated with cryptocurrencies is their extreme price volatility. The value of cryptocurrencies can experience significant fluctuations within short periods. Investors must be prepared for the possibility of substantial gains or losses in their cryptocurrency holdings.
2. Regulatory Uncertainty: Cryptocurrencies operate in a regulatory landscape that is still evolving. The lack of standardized regulations across jurisdictions introduces uncertainties regarding their legal status, taxation, and consumer protection. Regulatory changes can impact the viability, adoption, and usage of cryptocurrencies, leading to potential risks for investors and digital banking institutions.
3. Cybersecurity Vulnerabilities: Cryptocurrencies face cybersecurity threats due to their digital nature. Hacking attempts, phishing attacks, and theft pose significant risks to individuals and digital banking platforms that deal with cryptocurrencies. Robust security measures, such as secure wallets and strong authentication protocols, are essential to safeguard against these risks.
4. Market Liquidity: Cryptocurrency markets may experience liquidity challenges, particularly for less-established or low-volume cryptocurrencies. Limited liquidity can impact the ability to buy or sell cryptocurrencies at desired prices, leading to potential trading difficulties and increased transaction costs.
5. Technological Risks: Cryptocurrencies rely on underlying technologies, such as blockchain, which are still evolving. Technical vulnerabilities, software bugs, and network disruptions can pose risks to the stability and reliability of cryptocurrencies. Ongoing technological advancements and upgrades are necessary to mitigate such risks.

C. The Future of Cryptocurrencies in Digital Banking:

Despite the risks, cryptocurrencies have the potential to shape the future of digital banking in several ways:

1. Increased Financial Inclusion: Cryptocurrencies can provide access to financial services for the unbanked and underbanked populations, enabling secure and efficient cross-border transactions without the need for traditional banking intermediaries.
2. Streamlined Cross-Border Payments: Cryptocurrencies can facilitate faster and cheaper cross-border transactions, eliminating intermediaries and reducing transaction fees. Digital banking institutions can leverage cryptocurrencies to offer efficient global payment solutions to their customers.
3. Decentralized Finance (DeFi): Cryptocurrencies underpin the growth of decentralized finance, enabling various financial services, including lending, borrowing, and yield farming, without traditional intermediaries. DeFi platforms can integrate cryptocurrencies to provide innovative financial products to users.
4. Central Bank Digital Currencies (CBDCs): Several central banks worldwide are exploring the development of CBDCs, which are digital currencies issued and regulated by central authorities. CBDCs can potentially enhance the efficiency and transparency of digital banking systems, bridging the gap between traditional currencies and cryptocurrencies.

D. Conclusion:

Cryptocurrencies have emerged as a disruptive force in the financial industry, offering unique advantages and challenges. Understanding the risks associated with cryptocurrencies is crucial for individuals and digital banking institutions venturing into this domain. While risks such as price volatility and regulatory uncertainties persist, cryptocurrencies hold the potential to transform digital banking by enabling financial inclusion, streamlining cross-border payments, fostering decentralized finance, and paving the way for central bank digital currencies.

As the digital banking landscape continues to evolve, carefully navigating the risks and leveraging the opportunities presented by cryptocurrencies will be pivotal for the future of the industry.

Should you have any further questions, please do not hesitate to contact us at [email protected].

Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as financial or investment or legal advice on any matter. It is important to conduct thorough research and consult with financial professionals before making any investment decisions related to cryptocurrencies or digital banking. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.