Cyprus Securities and Exchange Commission Ceases Registration of Crypto Asset Service Providers (CASPs) Ahead of New EU Regulation

The Cyprus Securities and Exchange Commission (CySEC) has announced that as of today, it will no longer accept applications for the registration of Crypto Asset Service Providers (CASPs) under national rules. This decision comes in anticipation of the implementation of the new EU Regulation (EU) 2023/1114 on Markets in Crypto Assets (MiCA), which will come into force on December 30, 2024.

Key Dates and Transitional Measures

The CySEC has made it clear that the last date for accepting notifications from entities registered with one or more competent national authorities within the European Economic Area (EEA) for the provision of crypto asset services is October 30, 2024. After this date, CySEC will cease to accept such notifications. However, those entities that successfully submit their notification by this deadline will be allowed to continue offering their services cross-border within the Republic of Cyprus during the transition period.

Moreover, CySEC highlights that the MiCA regulation has already taken effect for issuers of asset-referenced tokens (ARTs) and electronic money tokens (EMTs) as of June 30, 2024. A transitional period has been established under Article 143(3) of MiCA, allowing CASPs that are registered in the CySEC registry by December 30, 2024, to continue offering services until July 1, 2026, or until they secure or fail to secure authorisation under Article 63 of MiCA, whichever date comes earlier.

Impact on Registered CASPs

For CASPs currently registered with CySEC or those that will be registered before December 30, 2024, the following provisions apply:

  1. Continued Operation: These providers will be allowed to operate until July 1, 2026, under the transitional regime, unless they receive their MiCA license sooner.
  2. Licensing Requirement: CASPs must apply for licensing under the MiCA regulation before the transition period ends. Failure to do so or failure to obtain a license will result in the cessation of their operations.
  3. Notification Obligations: CASPs must inform CySEC immediately upon receiving their MiCA license or if their application is rejected during the transition period. This is to ensure the proper updating of the EEA CASP Registry maintained by CySEC.

MiCA Licensing and Application Process

CySEC will publish the necessary documents for the application submission process in accordance with Article 62(1) of MiCA, following the European Commission’s issuance of Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS). In the meantime, interested parties are encouraged to review the draft technical standards issued by the European Securities and Markets Authority (ESMA) to prepare their applications in advance.

Entities planning to offer crypto asset services in the European Union that are already licensed under the Cyprus Investment Services and Activities and Regulated Markets Law of 2017, the Open-Ended Undertakings for Collective Investment Law of 2012, or the Alternative Investment Fund Managers Law of 2013 should also take into account the provisions of Article 60 of the MiCA regulation. These entities are urged to prepare accordingly for the MiCA licensing requirements and ensure full compliance with EU law.

Final Notifications for EEA Registered Entities

As previously mentioned, CySEC will stop accepting notifications from entities registered in the EEA for providing crypto asset services as of October 30, 2024. Entities that submit a successful notification by this date will retain the right to continue offering their services cross-border in Cyprus during the transitional period. If these entities apply for a license under MiCA, they must notify CySEC immediately regarding the approval or rejection of their application to allow for the updating of the EEA CASP Registry.

Preparing for MiCA Compliance

In light of these regulatory changes, entities wishing to continue offering crypto asset services in the EU must start preparing for MiCA compliance. This includes reviewing the relevant technical standards and ensuring that their internal processes, IT systems, and operational frameworks meet the stringent requirements outlined by MiCA. The MiCA regulation aims to create a harmonised framework for crypto assets across the EU, promoting innovation while safeguarding consumer protection and market integrity.

Entities already operating in the crypto asset sector or those planning to enter it should be aware of the significant impact of MiCA and take all necessary steps to secure the required licenses before the end of the transitional period.

Conclusion

The cessation of CASP registrations under national rules by CySEC marks a significant step towards the full implementation of MiCA in Cyprus and the wider European Union. With the transition period providing a grace window until 2026, registered CASPs have time to adapt to the new regulatory landscape, but they must act swiftly to secure their licenses and ensure compliance with the MiCA framework. Interested parties should keep abreast of further developments and begin preparing their applications in accordance with the draft technical standards released by ESMA.