Background Regulatory Framework
The area of Cryptocurrencies has seen a tremendous growth during the last few years and naturally Regulation grows with it. On the 19th of June, 2018, the European Parliament announced the adoption of the Fifth Anti-Money Laundering Directive 2018/843 (the “AMLD5 Directive”). To prevent the exploitation of platforms offering virtual currencies for money laundering and terrorist financing purposes, the AMLD5 Directive expands its scope compared to previous directives. Virtual currencies are now defined in statute, while providers engaged in the exchange services between virtual currencies and fiat currencies, as well as custodian wallet providers, fall under the scope of the AMLD5 Directive. The virtual market is now forced to implement adequate anti-money laundering control frameworks and comply with the standards imposed to the rest of the market. Anonymity offered through virtual currency networks becomes limited and the use of such networks is closely monitored.
Following the recommendations of ESMA and FATF, several European Member States decided to extend the scope of their AML laws beyond the provisions of the AMLD5 Directive in order to also include activities such as the exchange between crypto assets, transfer of virtual assets and the participation and/or provision of financial services related to the distribution, offering and sale of crypto assets.
Cyprus Regulatory Framework
In Cyprus, Law13(I)/2021 entered into force in February 2021, which harmonises the Cyprus Law with AMLD5 Directive. The revised Cyprus AML Law covers the following:
- Cryptocurrency exchanges (crypto-to-crypto and fiat-to-crypto and vice versa).
- Management, administration, transmission, transfer, retention, custodianship and safekeeping of crypto-assets or cryptographic keys or means which allow for the exercise control in crypto-assets.
- Offering and/or sale of crypto-assets, including the initial offering.
- Participation and/or provision of financial services related to the distribution, offering and/or sale of crypto-assets, including the initial offering.
Financial services related to the distribution, offering and/or sale of crypto-assets’ cover the following services and activities:
- Reception and transmission of orders.
- Execution of orders on behalf of clients.
- Dealing on own account.
- Portfolio management.
- Provision of investment advice.
- Underwriting and/or placing of crypto-assets on a firm commitment basis.
- Placing of crypto-assets without a firm commitment basis.
- Operation of a multilateral system where multiple third-party buying and selling trading interests in crypto-assets are able to interact in the system in a way that results in a transaction.
CySEC is the authority empowered to regulate Providers of Services related to crypto-assets as well as to maintain a register of such providers.
What we can do for you
Thanks to our vast legal and regulatory compliance experience in supporting local and international financial services institutions, continued interaction with regulatory authorities, multidisciplinary and diverse team of professionals, unparalleled track record, global network of associates and wealth of resources, our internationally recognised and award-winning team can support any client’s needs efficiently and effectively.
Our expert team of lawyers and consultants may assist you by undertaking 100 the registration process with CySEC % on your behalf and be responsible to manage and guide the completion and submission of the relevant application. As part of this service, amongst others, we can provide the following:
- Set up the company that will be promoted for registration as an crypto-asset provider;
- Design and build the corporate and organisatonal structure based on your needs (in a cost-efficient way);
- Draft of all relevant policies and procedures, such as: AML/CTF Manual and the General Operations Manual;
- Review the questionnaires of the shareholders, directors and heads of departments of the proposed company;
- Locate qualified non-executive directors (if needed);
- Complete the relevant checklists;
- Prepare and promote the Application File in accordance with current regulatory requirements;
- Prepare necessary justifications to be submitted to CySEC, as applicable;
- Prepare the letter(s) to accompany the application in the event that any exception is requested;
- Answer any relevant questions concerning the application process;
- Respond on your behalf to CySEC’s queries and suggestions relating to the application.
Dr. Demetra Valianti Plati