Crypto License in Cyprus

There are many advantages to obtaining a cryptocurrency license in Cyprus, making this jurisdiction attractive to companies looking to enter or expand into the cryptocurrency industry:

International reputation
Cyprus has a strong international reputation as a business-friendly jurisdiction, which can enhance the credibility and reputation of cryptocurrency businesses licensed in the country.

Progressive legislation
Cyprus is known for its regulatory framework in the cryptocurrency sector, providing legitimacy and credibility to businesses operating in this field. The regulator in Cyprus has extensive experience in regulating brokerages, providing transparent and clear requirements and expectations. The legislation is consistent and robust, providing stability for service providers.

A variety of investment licenses for you to choose from
You can choose the license that fits your business objectives and operations, ensuring compliance with strict industry standards and regulatory requirements.

Openness to innovation
Cyprus is actively open to innovation and recognizes various financial instruments, including cryptocurrency products.

Government support
Cypriot government authorities are actively cooperating with cryptocurrency companies, providing them with advice and assistance.

Vibrant cryptocurrency ecosystem
Cyprus’ cryptocurrency ecosystem is booming, attracting innovative companies and talent from around the world. A vibrant community of crypto-enthusiasts, investors, and entrepreneurs is emerging in Cyprus, creating an ideal environment for networking and collaboration.

Tax benefits
Cyprus offers competitive tax rates and incentives for businesses, including those operating in the cryptocurrency industry, which can result in significant cost savings.

Quick application process
The licensing process for cryptocurrency businesses in Cyprus is relatively simple and efficient.

Financial Infrastructure
Cyprus has a well-developed financial infrastructure, including banking and professional support services to facilitate the establishment and operation of a cryptocurrency business. By obtaining a license to exchange cryptocurrencies in Cyprus, entrepreneurs can take advantage of the ability to make payments through the island’s local banks.

Membership in the European Union
As a member of the European Union, Cyprus offers access to a large and rich market with consistent regulatory standards throughout the EU.

Strategic Location
Located at the crossroads of Europe, Asia, and Africa, Cyprus offers a strategic location for businesses wishing to access markets in different regions.

Access to Talent
Cyprus boasts a skilled workforce with expertise in finance, technology, and related fields, giving businesses access to a talent pool to support their operations.

To successfully obtain a license for cryptocurrency operations in Cyprus, an applicant must meet several conditions:

Company registration
To obtain a license, a company must be officially registered in Cyprus and have a minimum of four directors, of which two must perform executive functions. The qualifications of these directors must be confirmed by CySEC.

Commercial premises and staff
The company must have office space in Cyprus and employ staff with Cypriot citizenship to carry out the key operations of the business.

Anti-money laundering and counter-terrorist financing policies and procedures
Cyprus law requires that appropriate policies and procedures to prevent money laundering and terrorist financing be developed and implemented.

Business continuity
The company must have mechanisms in place to ensure the smooth and sustainable operation of the business, as well as clearly defined procedures and lines of communication for effective management.

Minimum capital
A company applying for a license must meet the minimum initial capital requirements set by CySEC, which range from €50,000 to €150,000, depending on the type of license.

Reporting and KYC
The company must regularly provide CySEC with detailed information on its activities, including financial statements, transaction data, and customer information, comply with the reporting deadlines set by CySEC, and cooperate with CySEC in the event of requests for additional information or audits.

Contacts
CySEC will interact with Cypriot cryptocurrency companies primarily through their executive directors residing in Cyprus.

Internal regulations
To maintain an impeccable reputation and protect clients from conflicts of interest, Cypriot cryptocurrency companies need to have strict internal regulations in place.

Unlike some other countries, Cyprus does not have different types of crypto licenses in the traditional sense. There is one main license for crypto activities – the Crypto Asset Service Provider (CASP) registration. This is the official license required for any company to operate a crypto business in or from Cyprus. It regulates all aspects of the cryptocurrency services offered by the company.

However, within CASP registration, some levels depend on the specific crypto activities carried out by the company:

CASP Class 1

This license is issued to CASPs whose primary activity is to provide financial advice on cryptocurrency investments. The minimum required share capital for licensees is €50,000.

CASP Class 2

This license allows the provision of advice and various financial services, including:

receiving and transmitting clients’ orders;
executing orders on their behalf, converting cryptocurrencies into fiat money;
exchanging between various crypto-assets;
participating in financial transactions involving cryptocurrencies;
risk-free allocation of cryptocurrency assets;
investment portfolio management.

The minimum required share capital is €125,000.

CASP Class 3

CASPs holding this license provide various Type 1 and Type 2 financial services, as well as insurance and placement of cryptocurrency assets, cryptocurrency exchange platform management, and secure storage solutions.

The minimum required authorized capital is €150,000.

CySEC sets several strict criteria and document requirements for starting a cryptocurrency business in Cyprus. The following are the main ones:

1. Legal documents confirming the state registration of your organization, including the memorandum of association and articles of association.
2. Resumes and short biographies of key team members to assess their qualifications and management credentials.
3. Documentation describing the company’s corporate governance structure, including details of the board, executive team, and decision-making processes.
4. A detailed business plan including financial expectations, marketing strategies, and analysis of potential risks.
5. Anti-money laundering (AML) and customer due diligence (KYC) policies and procedures demonstrate how your company will mitigate financial crime risks.
6. Documentation describing internal control procedures, risk management policies, and measures to protect customer assets and information.
7. Documents proving financial stability, such as income and expense statements or guarantees from the bank.
8. Proof of identity of shareholders and managers, including proof of residence and other identifying information.
9. Legal statements confirming compliance with legal requirements, including anti-money laundering and anti-terrorism.
10. Additional licenses if the company already operates in other countries and has privileges there.

It is important to seek advice from legal and regulatory experts familiar with the licensing process in Cyprus to ensure that all necessary documents are prepared and submitted accurately and according to regulatory requirements.

Cyprus is actively monitoring the development of cryptocurrency regulation around the world, and as a result, the government has formed a special working group to develop and implement blockchain technology on the island, according to the Council of Ministers Decision No 85.629 of August 30, 2018. The priority of the national strategy is to develop a legal framework for the regulation of blockchain and cryptocurrencies.

Today, the Cyprus Securities and Exchange Commission (CySEC) is the leading regulatory body responsible for overseeing the financial market and regulating cryptocurrency activities on the island. The institution operates under the authority of the Cypriot Ministry of Finance and has established itself as a reliable and effective regulator. Thanks to the effective operation of CySEC, Cyprus has become one of the leaders in the online forex industry.

On November 25, 2020, CySEC adopted Circular C417 “Prudential Approach to Crypto Assets and Enhancement of Crypto Asset Risk Management Procedures”, which aims to ensure sound management of crypto assets and minimize the risks associated with them for Cyprus Investment Firms (CIFs).

The main provisions of the circular are:

• prudential approach – CIFs are required to have adequate cover for their investments in cryptocurrencies to ensure their financial soundness;
• risk management – CIFs must develop and implement effective procedures to manage the risks associated with cryptocurrency trading;
• legislative compliance – CySEC has provided CIFs with guidelines to ensure their compliance with Cypriot cryptocurrency legislation.

Circular C417 is an important step in the process of creating a robust and transparent legal environment for the development of cryptocurrency businesses in Cyprus.

The existing legislation on cryptocurrency business in Cyprus is closely linked to the country’s anti-money laundering and counter-terrorist financing laws. The AML Law L188(I)/2007 was amended in 2021 to bring the national legislation in line with the provisions of the 4th and 5th EU Anti-Money Laundering Directives (EU Directives 2015/849 and 2018/843). As a result of these changes, providers of cryptocurrency-to-fiat currency exchange services, as well as companies providing depository wallet services for cryptocurrencies, are required to obtain a license for their activities.

The official name of the license for working with cryptocurrencies in Cyprus is the Crypto Asset Service Provider (CASP) registration. It is a prerequisite for any crypto activity both in Cyprus and with Cypriot clients. This means that foreign companies with crypto licenses in other countries will have to obtain a CASP to work with Cypriot clients. At the moment, only companies registered in the European Union can obtain a CASP.

It is important to note that the Markets in Crypto Assets Act (MiCA) is expected to come into force in the EU at the end of 2024, a landmark event for the cryptocurrency industry in Europe. MiCA will be a single legal act regulating cryptocurrency activity in all EU member states, eliminating market fragmentation and ensuring transparency and predictability for all participants. Once it comes into force, companies will have 18 months to adapt to the new legislation, but you can get advice from Fast Offshore Licenses’ lawyers on this today.

In Cyprus, the taxation of cryptocurrency is regulated under the tax and financial services legislation. In this jurisdiction, cryptocurrencies are considered a taxable asset, which implies that CASPs are liable to pay standard income taxes. In general, the taxation of cryptocurrency in Cyprus depends on the nature of the cryptocurrency activity and the status of the person engaged in the activity.

The main aspects of cryptocurrency taxation in Cyprus:

1. Corporate Income Tax (Corporate Income Tax).

Profits derived from cryptocurrency transactions are generally subject to corporate income tax. The corporate income tax rate in Cyprus is 12.5%. However, income derived from cryptocurrency activities can be reduced by taking into account the costs associated with its receipt. This tax structure makes Cyprus an attractive destination for cryptocurrency transactions and related services.

2. Capital Gains Tax.

Cyprus legislation does not contain any provisions on how cryptocurrency profits are taxed, regardless of whether they belong to an individual or a legal entity. There is no Capital Gains Tax (CGT) on the sale of shares or business assets, except for capital gains from immovable property in Cyprus and shares in companies whose assets consist of immovable property in Cyprus.

3. Value Added Tax (VAT).

In Cyprus, cryptocurrency used as a means of exchange or payment is not subject to VAT.

4. Personal Income Tax (Personal Income Tax).

For individuals who earn income from cryptocurrency transactions, tax rates may apply depending on the nature and amount of that income. For example, profits from mining or trading cryptocurrency may be subject to Personal Income Tax.

5. Capital gains tax (or investment income tax).

Income from cryptocurrency investments, such as dividends and interest, may be subject to taxation in Cyprus under the tax laws.

It is important to note that the taxation of cryptocurrency in Cyprus may vary depending on specific circumstances and legislative changes. Before conducting cryptocurrency transactions in Cyprus, it is recommended that you consult with a tax advisor or Fast Offshore Licenses lawyer to understand your tax obligations and relevant requirements