CASPs must register with CySEC in order to be able to provide encryption exchange services within the regulatory framework.
The Cyprus Securities and Exchange Commission (CySEC) is the competent independent supervisory authority responsible for the supervision of investments, services and securities transactions in the Republic of Cyprus as well as the collective investment and asset management sector. CySEC is also responsible for licensing business entities that wish to operate in the field of cryptocurrencies.
In June 2021 CySEC, as an anti-money laundering and anti-terrorism financing (AML/CFT) body and overseer of cryptocurrency transactions in or out of Cyprus, presented the Register of Crypto Asset Providers (CASPs) and the conditions of their operation, registration and supervision. The Law on the Prevention and Suppression of Money Laundering and Terrorist Financing (the Law), defines CASPs as any business entity and/or any natural person that exchanges cryptocurrencies with fiat currencies, exchanges cryptocurrencies, manages, transfers, holds and/or stores, cryptographic assets or cryptographic keys or means enabling the exercise of control over cryptographic assets, offering and/or selling cryptographic assets, including the initial offering of participation and/or provision of financial services related to the distribution, offering and/or sale of cryptographic assets.
In accordance with Law, CASPs offering their services within or outside Cyprus must qualify as obliged entities within the meaning of the Anti-License Act and are therefore subject to all AML/CFT obligations. As such, these entities must be registered with CySEC in order to be able to provide such encryption exchange services within the regulatory framework.
The existing legal framework regulates, inter alia, the suitability and well-being of CASPs and the persons holding a management position, the conditions in relation to the registration as a CASP, the organisational and operational requirements, the preparation of Know Your Client and other due diligence measures. It also regulates the planning of the financial profile of the clients, the determination of the source of the clients' funds, the monitoring of the clients' transactions and the identification and reporting of suspicious transactions and the undertaking of a comprehensive risk assessment in relation to the clients' activities.
In September 2020, the European Commission approved an extensive new digital financing package aimed at transforming the European economy over the coming decades, for cryptocurrency markets. MiCAR is the proposal of the European Union for the harmonization of the European framework for the issuance and trading of various types of cryptocurrencies and it proposes a legal framework for assets, markets and service providers enabling the provision of licensed services across the EU. It is expected that MiCAR will be implemented in all Member States of the European Union in the form of a regulation, without the need for application in national law.
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