Crypto is Making a Comeback: Becoming a CASP in Cyprus
The crypto industry has seen an impressive turnaround, with Bitcoin skyrocketing from $16,000 to over $100,000, catching the eye of investors worldwide. The global market cap for cryptocurrencies has quadrupled to nearly $4 trillion in a relatively short time. Since Donald Trump’s election victory, the crypto space has experienced a resurgence, driven by hopes of lighter regulation and increased acceptance in mainstream finance.
Not long ago, Trump declared his intentions to make the United States the “crypto capital” of the world and proposed the establishment of a US Bitcoin strategic reserve. Key moves following his election included the appointment of a pro-crypto Chair of the Securities and Exchange Commission and the launch of his own digital currency, $TRUMP.
The rise in crypto assets has been fueled by a supportive US administration and anticipation of minimal regulatory oversight, paving the way for increased interest from traditional investors such as pension funds and retail investors. Notably, pension schemes in Wisconsin and Michigan have already heavily invested in Bitcoin ETFs, with more institutional investors expected to follow suit. Blackrock’s Bitcoin ETF (IBIT) witnessed $37 billion in net inflows since its inception in January 2024.
The growing adoption of cryptocurrencies by both individual and institutional investors is likely to drive further capital inflows into crypto-assets and crypto-funds, leading to more tokenization within the economy. The upcoming implementation of the EU’s Markets in Crypto-Assets Regulation (MiCAR) couldn’t have come at a better time to facilitate the expansion of crypto operators into the broader EU market through a single authorization process.
When choosing an EU jurisdiction for establishing a crypto-asset services provider (CASP) business and launching operations in the EU, factors such as operating expenses, tax implications, talent availability, regulatory landscape, financial infrastructure, and jurisdictional credibility must be carefully considered. Cyprus has emerged as a prominent regional hub for financial services, excelling in each of these areas.
Prior to MiCAR, crypto-assets not falling under MiFID financial instruments or e-money under the E-Money Directive were subject to varying national regulations within the EU, complicating cross-border operations. The MiCAR framework establishes regulations for the issuance, offering, and trading of crypto-assets as well as the provision of crypto-asset services in the EU.
The regulation classifies crypto-assets into three distinct categories, applying different regulatory requirements to each. Stablecoins are typically classified as Electronic Money Tokens (EMTs) or Asset-Referenced Tokens (ARTs), subject to stringent regulations. Other cryptos are only required to meet transparency and disclosure standards. Crypto-assets in compliance with MiCAR enjoy EU-wide passporting rights, enabling issuers to offer tokens or have them traded across the Union through notification to their Home Member State authority.
In conclusion, the crypto industry’s resurgence, coupled with supportive regulatory frameworks like MiCAR, paves the way for further growth and integration of crypto-assets into mainstream financial markets, offering new opportunities for investors and providers alike.