The announcement that the Digital Bank Revolut was granted a Crypto-Asset Service Provider (CASP) license in Cyprus has been in the news these last few days.
This was much-anticipated as Revolut is at the forefront of Crypto-Asset services and was one of the first companies to apply for a CASP license in Cyprus.
Revolut chose Cyprus to ensure compliance with the upcoming EU’s (draft) MICA Regulation and minimise disruption to its operations once MICA comes into effect.
You may be wondering what is a CASP license?
What services will Revolut provide using this new regime?
Importantly, what is MICA and what changes do we expect in the next few years?
Crypto-Assets Service Providers in Cyprus
The Cyprus Security and Exchange Commission’s (CySEC) directive on Crypto- Asset Service Providers was introduced in 2021 following introduction of the 5th EU AML Directive and the 5th AML Law in Cyprus.
Virtual Assets Services Providers that offer services from or in Cyprus must be registered in a registry to be kept by CySEC and are supervised only in terms of AML issues.
CASPs may provide any and/or all of the Crypto Asset services listed below:
- Exchange between crypto-assets and fiat currencies;
- Exchange between crypto-assets;
- Management, transfer, holding and/or safekeeping, including custody, of crypto-assets or cryptographic keys or means for the exercise of control over crypto-assets;
- Offering and/or sale of crypto-assets, including the initial offering; and,
- Participation and/or provision of financial services for the distribution, offer and/or sale of crypto-assets, including the first offering.
The EU’s MiCA: Markets in Crypto-Assets Regulation
Cyprus’ CASP Directive and licensing regime is considered a preparatory step to the EU’s Markets in Crypto-Assets Regulation (MiCA).
MiCA forms part of the Digital Finance Package proposed by the European Commission (EC) to fulfill its Digital Finance Strategy, which aims to foster innovation and ensure financial stability and consumer protection. The European Commission aims for the same rules and supervision to apply to FinTechs, BigTechs and providers of more traditional financial services.
MiCA is expected to:
- introduce an EU-wide requirement for the authorisation of crypto-asset service providers (CASPs) to operate within the EU;
- provide European passporting rights for authorised CASPs;
- establish requirements in relation to the protection of consumer wallets and liability for loss of consumer’s crypto-assets;
- introduce market abuse requirements to deter market manipulation and insider dealing in relation to crypto-assets;
- cover disclosures relating to environmental and climate footprints;
- protect consumers by introducing requirements requesting stablecoin issuers to build liquid reserves, with a 1:1 ratio, partly in the form of deposits;
- regulate the development of asset-referenced tokens (ARTs) based on a non-European currency as a widely used means of payment, with the aim to preserve the EU’s monetary sovereignty; and
- exclude from its scope non-fungible tokens (NFTs) unless they fall under existing crypto-asset categories.
An Agreement was reached earlier this year between EU Member States on the draft MICA. This is subject to the approval of the Council of the EU and the European Parliament, prior to the formal adoption procedure.
It is anticipated that the updated text will be released in the coming months, with implementation expected by 2024.
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