How to obtain a cryptocurrency license in Cyprus 

Regulation of the cryptocurrency market is constantly becoming stricter. Nowadays jurisdictions impose high regulatory and risk management requirements on virtual asset service providers.

Despite this, we always manage to find a solution that suits the client. All the time our team provides research of the market and regulations on various markets to find the best jurisdiction. Recently we have made the global overview of the VASP regulation in EEA and ready to share information with our future and existing clients. Today we will look at the features of obtaining a cryptocurrency license in Cyprus.

Tax Summary:

  1. Personal income tax – from 0 to 35%
  2. Corporate income tax- 12.5%

What law/s governs VASP activities?

  1. The Electronic Money Law of 2012 (81(I)/2012)
  2. The Prevention and Combating of Money Laundering Law of 2007 (L. 188(I)/2007)
  3. Law on the Provision and Use of Payment Services and Access to Payment Systems (31(I)/2018)

What activities are included in VASP services?

According to article 2 of the Law on the Provision and Use of Payment Services and Access to Payment Systems (31(I)/2018), the activities of crypto asset service providers (CASP) include the following:

  1. Exchange between cryptoassets and fiat currencies.
  2. Exchange between cryptoassets.
  3. Managing, transferring, transferring, holding, and/or custody, including custody, of cryptoassets or cryptographic keys or means that allow the exercise of control over cryptoassets.
  4. Offer and/or sale of crypto-assets, including the initial offer.
  5. Participation and/or provision of financial services related to the distribution, offering and/or sale of crypto-assets, including the initial offering.

Who is the VASP regulator?

  1. The Cyprus Securities and Exchange Commission (CySEC) – mainly supervision of CASPs
  2. Central Bank of Cyprus (CBC) – mainly supervision of EMIs

What is the procedure for registering a VASP for a local company?

According to the Law on the Provision and Use of Payment Services and Access to Payment Systems (31(I)/2018), companies must get a license to provide CASP`s services, procedure of obtaining license includes the following:

  1. Submit an application to the CySec email along with required documents according to subsections 3 and 8, section 5 of the Law on the Provision and Use of Payment Services and Access to Payment Systems (31(I)/2018):
    • A programme of operations, setting out in particular the type of payment services envisaged.
    • A business plan including a forecast budget calculation for the first three (3) financial years.
    • Evidence that the payment institution holds initial capital (minimum 125,000 or 150 000 euros if the applicant intends to provide additionally custodial wallet services).
    • A description of the measures taken for safeguarding payment service users’ funds.
    • A description of the applicant’s governance arrangements and internal control mechanisms.
    • A description of the procedure in place to monitor, handle and follow up a security incident and security related customer complaints.
    • A description of the process in place to file, monitor, track and restrict access to sensitive payment data.
    • A description of business continuity arrangements including a clear identification of the critical operations, effective contingency plans and a procedure to regularly test and review the adequacy and efficiency of such plans.
    • A description of the principles and definitions applied for the collection of statistical data on performance, transactions and fraud.
    • A security policy document, including a detailed risk assessment.
    • The applicant’s legal status and articles of association.
    • The identity of persons holding in the applicant, directly or indirectly.
    • A description of the applicant’s structural organization.
    • The address of the applicant’s head office.
  2. Competent Authority evaluates application based on criteria like:
    • Initial capital requirements (minimum €350,000) (Article 7).
    • Robust governance arrangements, organizational structure, risk management procedures (Article 11).
  3. If criteria met, CySec grants operating license to CASP.

Is there any specific authorization required for a VASP from another EU member state to provide services in this jurisdiction?

According to the Law on the Provision and Use of Payment Services and Access to Payment Systems (31(I)/2018), CASPs/VASPs from other EU members are not required to additionally authorize or obtain a license in Cyprus to perform their activities.

What is the liability for the activities of a VASP from another EU member state without local registration/authorization in this jurisdiction?

According to section 26 of the Law on the Provision and Use of Payment Services and Access to Payment Systems (31(I)/2018, providing payment services without CASP license is a criminal offense and may be punished with a prison sentence not exceeding 2 years or with a fine not exceeding €85,000 and/or with both of these penalties.


Manimama Legal & Growth Agency provides a gateway for the companies operating as the virtual asset wallet and exchange providers allowing to enter to the markets legally. We are ready to offer an appropriate support in obtaining a license with lower founding and operating costs. We offer KYC/AML launch, support in risk assessment, legal services, legal opinions, advice on general data protection provisions, contracts and all necessary legal and business tools to start business of virtual asset service provider.


The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation. 

Real Estate In Cyprus: Residentship and VAT Aspects

With new rules of acquisition residentship, Cyprus became one of the most popular places within the EU to move to.

This exploration delves into the meticulous legal frameworks governing the process, dissecting the intersection between property investment and the intricacies of securing permanent residency. Join us on this legal odyssey, where the complexities of real estate and immigration law converge, paving the way for a nuanced understanding of achieving residency through property ownership in Cyprus.

Prerequisites

An auspicious route for non-European Union citizens seeking a residence permit in Cyprus lies within the investment scheme. This avenue necessitates the procurement of a property valued at a minimum of EUR 300,000, exclusively from a developer and of recent construction. The funds for this acquisition must originate from the applicant’s personal account in a financial institution.

Moreover, foreign funds designated for the investment can be transferred to Cyprus from a corporate bank account, wherein the applicant and/or their spouse hold exclusive shareholding. This condition applies, provided that the shareholder is explicitly included in the residency application. The same principle extends to the transfer of the investment’s value, which should be deposited into the seller’s account at a Cypriot financial institution.

If a person decides to change his life and move to Cyprus to live, he will need to prepare himself for the procedure. Next documents may be required to submit:
Compile the necessary documentation meticulously to navigate the residency application process successfully:

  • Passport and Personal Information:

Ensure possession of a valid passport with an expiration date extending at least 12 months from the application date.

  • Professional Background:

Present a detailed Curriculum Vitae encapsulating relevant personal and professional information.

  • Financial Verification:

Substantiate an annual income of at least €50,000, with incremental allowances for the spouse (€15,000) and each dependent minor child (€10,000). This income, derived from abroad, spans salaries, pensions, dividends, rents, and more. Authentication necessitates a tax return declaration from the country of tax residency. Consideration of the spouse’s income is integral to the total income calculation.

  • Tax Residency Documentation:

Include tax return declarations from the country of tax residency, accompanied by original documents and a duly sworn affidavit.

  • Clean Record:

Provide a Criminal Record Certificate from country of origin, demonstrating a clean legal history.

  • Health Coverage:

Secure an active Health Insurance Policy Certificate covering inpatient and outpatient care, along with the repatriation of remains.

Be mindful that specific circumstances may require additional documents on a case-by-case basis.

Proceeding with the property acquisition, remember the following:

Property Documentation:

Obtain the title of ownership or a contract of sale for the selected property, ensuring all documents are duly stamped.

Financial Proof:

Substantiate proof of payment totaling at least €300,000 (plus VAT) for the property. Note that if the property is still under construction, a sales agreement and a receipt from the Land Registry are essential for submission.

VAT reduction and other issues

When buying real estate for living accommodation a purchaser should be aware of the next thing — VAT rate on Cyprus in general is 19%, but it can be reduced to 5%. 

The 5% VAT rate is applicable to the initial 130 square meters of a house’s building area, determined by the building factor and architectural plans submitted for a building permit (or when not required). This preferential rate is extended to residences valued at €350,000 or less, with the overall transaction not surpassing €475,000 and the total buildable area capped at 190 square meters. Individuals with disabilities benefit from an expanded scope, where the 5% VAT applies to the first 190 square meters, irrespective of the total size. The transaction value is subject to potential revision, and families with more than three children enjoy an additional area increase of 15 square meters for each child beyond three.
And other important things to remember: 

  • Upon acquiring the initial home with the reduced 5% VAT rate, a 10-year restriction is imposed, preventing the use of this benefit for another property. This measure safeguards the initiative for first-time buyers and prevents potential misuse.
  • While the 10-year rule generally applies, specific exceptions exist. If a person ceases using the first home as his primary residence within this period, notifying the Registrar within 30 days is mandatory. Additionally, he must pay the difference between the reduced and standard VAT rates for the period the property wasn’t his primary residence.
  • In cases of the beneficiary’s death or property transfer to an adult child not benefiting from the reduced VAT rate, the 10-year restriction is lifted. This ensures flexibility in specific situations while upholding the program’s integrity.
  • It’s imperative to note that if later found ineligible for the reduced VAT rate, full tax payment based on the standard rate becomes obligatory. Thus, understanding eligibility criteria and adhering to associated regulations is paramount.

Conclusion

In summary, Cyprus offers a compelling proposition for those seeking permanent residency through real estate investment. With a minimum property value of €300,000 and attractive incentives like the reduced VAT rate, the landscape is ripe for strategic acquisitions.

For a seamless journey, consider the expertise of Manimama. We not only assist in finding the right property but also guide through the intricacies of purchasing real estate and obtaining residency. We have contacts with developers and partners throughout Cyprus, and we are ready to offer you a brand new project — Alexandra Court. It’s a fascinating residential house with 8 apartments of different sizes in village Emba (only 10 minutes by car from Paphos). Prices start from €160 000 for general investing and there are variants for being eligible for residentship application. Don`t hesitate – contact us and make your dreams come true.

The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.


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Cyprus E-money service regulation Act: application on blockchain and virtual money

The Cyprus government is taking steps to bring some clarity to the vague legal framework of the crypto-assets sector.

The regulatory incentives, in line with favourable corporate income tax rate (12.5%) seem to attract more investment into virtual assets business. With this in mind, it is worth discussing if recent developments are enough to meet emerging industry standards.

The Cyprus government is taking steps to bring some clarity to the vague legal framework of the crypto-assets sector. The regulatory incentives, in line with favourable corporate income tax rate (12.5%) seem to attract more investment into virtual assets business. With this in mind, it is worth discussing if recent developments are enough to meet emerging industry standards.

Regulatory measures

Country’s primary financial regulator is the Central Bank of Cyprus (hereinafter referred as:-“CBC”) that supervises and issues licenses for setting up and operation of fintech businesses, including payment and electronic money institutions.

The Cyprus Securities and Exchange Commission (hereinafter referred as:-“CySEC”) administers operations and assures compliance with financial regulations and with the European MiFID financial harmonised law.

The Cyprus government has amended main statutory legislation in the industry – Electronic Money Law (2012) and 2018 consistent with the following EU directives:

  • 2009/110/EC of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions; and
  • (EU) 2015/2366 of 25 November 2015 on payment services in the internal market.

Registration and authorisation procedure

Accordingly, the electronic money services can only be carried out with the authorisation of the Central Bank of Cyprus or by remaining EU member states’ competent authorities.

The main requirement that has to be met to be granted an authorisation is that an e-money entity must be a legal person incorporated and registered in the Republic of Cyprus with a head office and must conduct part of its e-money service activity and/or provide payment services which are not associated with issuance of electronic money.

As per subsections (3) to (8) of section 5 of The Payment Services and Access to Payment Systems Laws of 2018 and 2019 the following documents are needed to apply:

  • company identification details;
  • program of operations;
  • business plan;
  • structural organization of the business;
  • evidence of initial capital (€350.000 for Electronic money issuers);
  • description of measures to safeguard funds of users;
  • governance arrangements and internal controls;
  • procedures for monitoring, handling, and following up on security incidents and security-related customer complaints;
  • processes for filing, monitoring, tracking and restricting access to sensitive payment data;
  • business continuity measures;
  • the principles and definitions applicable to the collection of statistical data on performance, transaction and fraud;
  • security policy document;
  • internal control schemes to comply with obligations relating to money laundering and terrorist financing;
  • identity and suitability assessment of persons with qualifying holdings (shareholders) in the applicant
  • identity and suitability assessment of directors and persons responsible for the management of the payment institution;
  • details of any outsourcing arrangements (auditors);
  • professional indemnity insurance or a comparable guarantee for payment initiation services and account information services.

Once the application is filed it takes up to 4 months to receive a decision from CBC.

Except institutions

Meanwhile, the type entities listed below are exempt from applying to authorization by CBC to carry out electronic money business:

  • banks licensed by the CBC or by any other EU member state’s competent supervisory authority;
  • сooperative credit institutions which have obtained a license from the Authority for the Supervision and Development of Cooperative Societies of Cyprus.
  • institutions that provide postal payment services and issue e-money owing to applicable law;
  • European Central Bank, National Central Banks when not using their monetary and public powers;
  • member states or their regional authorities when not acting in their capacity as public authorities;
  • as well as Electronic money institutions authorised to operate by the competent supervisory authorities of other EU member states.

Above mentioned entities have a right to establish or to conduct cross-border e-money business activities on condition that the relevant bodies of their home member state send a notification to the CBC.

Anti money laundering measures and crypto asset service providers directive

Multiple competent authorities supervise activities related to the money laundering and terrorist financing, such as:

Pursuant to section 59(1)(a) of Prevention and Suppression of Money Laundering Activities Laws of 2007 and 2019 (hereinafter:- “AML law”) the electronic money, payment and currency exchange operators fall under the supervision of the CBC.

AML law is the only legal framework which recognizes crypto-assets. pursuant to the law, crypto-assets is ‘a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically and is not:

  1. fiat currency; or
  2. electronic money; or
  3. a financial instrument that provides for the provision of investment services, the exercise of investment activities, the operation of regulated markets and other related matters.’

Under 61E(1) of the AML Law, on September 13, 2021, CySEC issued Directive 269/2021 which amended earlier ‘Directive for the Prevention and Suppression of Money Laundering and Terrorist Financing (Register of Crypto Asset Service Providers)’ from 25th of June 2021.

According to the directive, CySEC establishes statutory requirements for Crypto and Virtual Asset Service Providers (hereinafter referred as:-“CASPs or VASPs”) to comply and to be featured in the register which maintains in its website. The register is open to public and includes the following data of members:

  • name, trading name, legal form and registration number (legal entity identifier – ‘’LEI”);
  • registered physical address;
  • official website;
  • services offered by the CASPs or VASPs;

The registration is mandatory for the following entities:

  • CASPs providing or carrying out services or activities from Cyprus, despite their registration status in other EU members states to conduct similar service;
  • CASPs providing or carrying out services or activities to Cyprus, except for those entities already holding valid registration from other EU member state’s respective registry to provide services or carry out such activities and services.

So, cryptocurrency service providers who are planning to offer any of the above listed activities must register with CySEC for the purposes of anti money laundering and combating terrorist financing.

Application for registration should also contain the following information:

  • all public addresses of crypto-assets and/or of public keys/digital wallets controlled by the CASP;
  • the crypto assets which the CASP operates or provides services for;
  • the class of customers the CASP serves;
  • details if the CASP is engaged in business payment of crypto assets;
  • crypto asset ATMs, number and locations offered by CASP;
  • jurisdictions in which CASP operates;
  • registrations and licenses owned by CASP.

The official fee for reviewing applications and registration by CySec is €10,000. Upon successful registration, the first annual fee payment will be waived and subsequent yearly fee in the amount of €5,000 applies henceforth. In addition, the fee amount ranging from €1,000 – €5,000 applies to request changes to existing registration, depending on the nature of notification inquired.

Moreover, article 14 of the directive mandates CASPs to regularly maintain a minimum equity capital as following:

  1. CASP that provide investment advice – €50.000;
  2. CASP that provide investment advice as per Category 1 and / or any of below mentioned services – €125.000:
  • reception and transmission of client orders;
  • execution of orders on behalf of clients;
  • exchange between crypto-assets and fiat currency;
  • exchange between crypto-assets;
  • participation and/or provision of financial services related to the distribution, offering and/or sale of crypto-assets, including the initial offering;
  • placement of crypto-assets without firm commitment;
  • portfolio management.

3.CASP that provides investment advice as per Category 1 or 2 and / or any of the below mentioned services – €150.000:

  • administration, transfer of ownership, transfer of site, holding, and/or safekeeping, including custody, of crypto-assets or cryptographic keys or means enabling control over crypto-assets;
  • underwriting and/or placement of crypto-assets with firm commitment;
  • operation of a multilateral system, which brings together multiple third-party buying and selling interests in crypto-assets in a way that results in a transaction.

However, at the time of writing, CySECs Registry website has not yet been launched and does not seem to be fully operational.

Concluding remarks

All things considered, Crypto-assets have not yet developed into a distinct identity in the eyes of the law to be regulated as a separate type of economic activity. In the short run, it might not be possible to watch the impact of recent directives on economic activity in the internal market, thanks to the entry restrictions which might restrict new applicants. However, there is a hope that the recently proposed Markets in Crypto Assets Directive is believed to establish a universal framework across the EU and as time passes normalizes the widespread adoption of cryptocurrency across the member states.

The content of this article is intended to provide a general guide to the subject matter, not be considered as a legal consultation.


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