On December 13, 2024, the Cyprus Securities and Exchange Commission (CySEC) released the Policy Statement (PS-03-2024) on the fees payable and information required for entities falling under the scope of the Markets in Crypto-Assets Regulation (MiCAR). This publication follows the consultation period where CySEC engaged with stakeholders in the crypto-asset sector, ensuring that the final approach reflects industry insights and addresses key concerns. This detailed Policy Statement establishes a clear framework for businesses operating with crypto-assets in Cyprus, especially those dealing with Asset-Referenced Tokens (ARTs), E-Money Tokens (EMTs), and other crypto-assets not falling under the ART or EMT categories.
MiCAR, which came into force in the European Union on 31 May 2023, aims to create a harmonized legal framework for crypto-assets, enhancing regulatory clarity and reducing risks in the crypto-asset market. The regulation focuses on ensuring transparency, investor protection, and market integrity in relation to three main categories of crypto-assets:
- Asset-Referenced Tokens (ARTs): Often referred to as stablecoins, ARTs are designed to maintain a stable value by referencing other assets, such as fiat currencies or commodities.
- E-Money Tokens (EMTs): These are crypto-assets that maintain a stable value by referencing a single fiat currency, and they are similar to electronic money.
- Other Crypto-Assets: This category includes all crypto-assets not classified as ARTs or EMTs, providing a residual category for diverse digital assets.
Entities engaging in the issuance, offer, or provision of services related to these crypto-assets in the EU are subject to MiCAR’s provisions. These businesses range from issuers of crypto-assets to Crypto-Asset Service Providers (CASPs), each of which is required to meet strict regulatory standards.
Key Components of the Policy Statement
1. Fee Structure for Entities under MiCAR
The Policy Statement establishes a comprehensive fee structure for entities regulated under MiCAR, focusing on the following categories:
- Notification and Modification Fees: Entities seeking to notify CySEC of a crypto-asset white paper, or modifications to such papers, will be subject to specific fees:
- €1,000 for the notification of a new white paper.
- €500 for the notification of a modified white paper. These fees apply to crypto-assets other than ARTs and EMTs, and stakeholders have supported these amounts as fair and aligned with industry standards.
- Annual Fees: Entities under MiCAR, including offerors and persons seeking admission to trading of crypto-assets (excluding ARTs and EMTs), will pay an annual supervision fee of €5,000, which will be due each November 30. For entities operating less than 12 months, the fee will be prorated.
- Specialized Fees for ARTs and EMTs: Issuers of ARTs and those seeking admission to trading will face application and assessment fees, which vary depending on the type of ART and its specific requirements. For example:
- Application for Authorisation to Offer ARTs: €15,000.
- Assessment of Plan for ART Issuers: €10,000 (required when thresholds for ART transactions are exceeded).
- Annual Fee for ART Issuers: €20,000 flat fee plus a variable fee based on the value of the reserve of assets held by the issuer.
- CASP Fees: Crypto-Asset Service Providers (CASPs) are subject to fees related to the application for authorisation, notifications of changes, and annual supervision. Notably, the annual supervisory fee for CASPs is based on the type of services they provide. For example:
- Custody and administration of crypto-assets: €10,000 annually.
- Operation of a trading platform: €20,000 annually.
- Exchange services and portfolio management: €5,000–€8,000 annually.
Additionally, a variable component will apply based on the turnover from crypto-asset services, with a cap of €500,000 annually.
2. Reporting Requirements and Information Submission
Alongside the fees, the Policy Statement outlines critical reporting obligations for entities under MiCAR. The reporting structure is designed to maintain transparency and ensure ongoing regulatory compliance. Notable reporting requirements include:
- Notification of Changes: Entities must notify CySEC of various changes, such as modifications to their white papers, changes to management bodies, key function holders, and any discontinuation plans. These notifications must be submitted promptly to ensure compliance with MiCAR’s governance standards.
- Annual Audits and Submissions: Issuers of ARTs and EMTs, as well as CASPs, are required to submit annual audited financial statements. These audits will form the basis for calculating certain fees, particularly the variable component for CASPs, based on their financial turnover. Additionally, ART issuers must submit an annual report on the reserve of assets they hold to ensure compliance with MiCAR’s liquidity requirements.
- Discontinuation and Recovery Plans: Issuers of ARTs are required to submit plans for the discontinuation of services or recovery plans in case of financial distress. These plans ensure that the issuer is prepared for all eventualities and that investor protection remains a priority.
3. Consultation Feedback and CySEC’s Response
CySEC’s final Policy Statement reflects the feedback received during the consultation period. In response to concerns raised by stakeholders, CySEC introduced a cap on the annual fees for CASPs, set at €500,000, providing businesses with more predictability regarding their regulatory costs. Furthermore, CySEC clarified the methodology for calculating the turnover component of the fees, which is based solely on revenue generated from crypto-asset services to avoid double-charging for services under different regulatory frameworks.
CySEC also clarified the process for entities that are currently operating under national regulations but intend to transition to MiCAR’s framework. These businesses will need to undergo full authorisation procedures to continue their operations once the MiCAR regime is fully implemented. Additionally, the MiCAR framework introduces several new definitions and obligations for CASPs, including the necessity to submit detailed assessments of the suitability of their management bodies.
4. Next Steps and Implementation Timeline
Entities affected by MiCAR are encouraged to begin their applications and submit notifications to CySEC as soon as possible. CySEC has also highlighted the importance of monitoring future publications by the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA), as these will further elaborate on the technical standards and guidelines for MiCAR’s implementation.
In particular, CySEC reminds entities that the regulation on the information accompanying transfers of funds and certain crypto-assets, which becomes applicable on December 30, 2024, must also be adhered to, particularly by CASPs operating during the grandfathering period of MiCAR’s transitional phase.
How FiveComply Can Help:
At FiveComply, we specialize in guiding businesses through the complex regulatory landscape of the financial and crypto-asset sectors. Our team of regulatory and compliance experts is equipped with the knowledge and experience to help your company navigate the evolving MiCAR framework, ensuring full compliance with CySEC’s new policies and reporting requirements.
We can assist you with:
- MiCAR Compliance Strategy: Tailoring a compliance plan that aligns with MiCAR’s detailed regulatory requirements.
- Application and Fee Guidance: Helping you understand the fee structure and supporting you through the application process for authorizations.
- Ongoing Regulatory Support: Providing continuous guidance on reporting, notifications, and submissions to CySEC.
Book an appointment with our experts today to get personalized, actionable insights and ensure your business stays ahead of regulatory changes in the crypto-asset industry.