Recent changes have tightened Cyprus crypto restrictions on cryptocurrency transactions, even as the country remains a popular hub for crypto businesses. If you're dealing with crypto in Cyprus, understanding these rules is critical-banks are now enforcing strict compliance measures that could affect your operations.
What are the key banking restrictions on crypto transactions in Cyprus?
Under the new regulations, several specific rules govern how banks handle crypto transactions. The most notable is the Travel Rule, which requires identity verification for all transactions over €1,000. This means banks must collect and share customer data for these transfers. According to Sumsub's 2025 Crypto Travel Rule Guide, this data must travel with the transaction itself, ensuring transparency.
Another key restriction is real-time beneficiary verification. All crypto transactions, regardless of amount, must undergo immediate checks to confirm the recipient's identity. Eurofast's September 2025 update notes this has increased processing times by 15-20 seconds per transaction. Non-compliance can result in penalties of up to €5 million or 10% of annual turnover.
Banks are also required to screen all transactions against EU and UN sanctions lists. This means they must block any transfers involving sanctioned entities. Additionally, enhanced due diligence measures apply to transactions involving self-hosted wallets-those not held by regulated exchanges. The Central Bank of Cyprus explicitly states that crypto is not legal tender, which adds another layer of caution for banks.
Who regulates crypto transactions in Cyprus?
The Central Bank of Cyprus (CBC) oversees electronic money tokens and issues warnings about crypto risks. They've published multiple statements since 2022, most recently in March 2025, emphasizing that cryptocurrencies aren't backed by any government or central bank. Meanwhile, the Cyprus Securities and Exchange Commission (CySEC) serves as the primary regulator for crypto-asset service providers (CASPs). As of Q2 2025, CySEC has registered 87 CASPs, according to Harneys' analysis of the Amending Law published on June 18, 2025.
Both entities work under EU directives, particularly the Markets in Crypto-Assets (MiCA) regulation and the Transfer of Funds Regulation (EU) 2023/1113. This dual-regulatory structure means CBC handles EMTs while CySEC oversees other crypto-assets, creating a complex but comprehensive oversight system.
How do these restrictions impact crypto businesses?
Despite Cyprus's reputation as a crypto-friendly jurisdiction, businesses face significant challenges. A Q2 2025 survey by the Cyprus Blockchain Association found that 68% of crypto firms struggle to establish traditional banking relationships. This is partly due to banks' cautious approach, even with regulatory frameworks in place.
Transaction delays are another issue. With real-time beneficiary verification required for all transfers, processing times have increased by 15-20 seconds per transaction. While this may seem minor, it adds up for businesses handling large volumes.
On the positive side, Cyprus doesn't charge capital gains tax on cryptocurrency sales-a benefit highlighted by Cryptoprocessing in 2025. However, Global Referral Group reported in 2025 that Cyprus is undergoing broader tax reforms that may change this in the future. The National Sanctions Unit, established in June 2025, has also increased scrutiny, with over 1,200 suspicious transaction reports from CASPs since the Travel Rule implementation.
Recent changes in 2025: what's new?
The June 18, 2025 Amending Law significantly expanded supervisory powers. It introduced a National Sanctions Unit to centralize oversight and enhanced penalties for non-compliance with the Transfer of Funds Regulation. Eurofast's September 2025 update details three new financial laws aimed at aligning Cyprus with EU standards, particularly Regulation (EU) 2023/1113 for cryptocurrency transfers.
The Central Bank of Cyprus has also launched its own Innovation Hub, signaling greater engagement with crypto developments under MiCA. However, traditional banks remain cautious. The requirement for instant payment services in euros by 2027, per Regulation (EU) 2024/886, is expected to increase cross-border digital payments by 35% annually. Despite this, experts predict that by 2027, 95% of crypto transactions in Cyprus will occur through registered CASPs, up from 78% in early 2025.
How to stay compliant with Cyprus' crypto banking rules?
Here's what crypto businesses need to do:
- Register with CySEC if operating as a crypto-asset service provider. This is mandatory for all CASPs.
- Implement KYC procedures for transactions over €1,000 and ensure real-time beneficiary verification for all transfers.
- Use automated tools to screen transactions against EU and UN sanctions lists.
- Maintain detailed audit trails for all crypto-related transactions.
- Leverage CySEC's Innovation Hub for guidance; they've helped over 200 registered participants since 2018.
- Stay updated on tax reforms, though currently there's no capital gains tax on crypto sales.
Working with compliance experts familiar with Cyprus' regulatory environment can help navigate these requirements. The CBC and CySEC both offer resources for businesses seeking to comply.
| Restriction | Threshold | Requirement | Penalty |
|---|---|---|---|
| Travel Rule | €1,000 | Identity verification and data sharing for transactions above this amount | Up to €5 million or 10% of annual turnover |
| Beneficiary Verification | All transactions | Real-time checks before processing | Same as above |
| Sanctions Screening | All transactions | Check against EU and UN lists | Fines and regulatory action |
Is cryptocurrency legal tender in Cyprus?
No. The Central Bank of Cyprus explicitly states that cryptocurrency is not considered legal tender. While you can use it for transactions, it's not backed by any government or central bank. This means banks are not required to accept crypto as payment, and they treat it as an asset rather than currency.
What happens if a bank refuses to work with my crypto business?
Many crypto businesses in Cyprus face banking refusals. According to the Cyprus Blockchain Association's 2025 survey, 68% of firms struggle to open bank accounts. The best approach is to register with CySEC as a CASP, which can improve your chances. Some businesses also use specialized crypto-friendly banks in other EU countries, though this may require additional compliance steps.
How do the Travel Rule requirements affect small transactions?
The Travel Rule applies only to transactions over €1,000. Below this threshold, identity verification isn't required for the transfer itself. However, banks still perform standard AML checks on all transactions. For small transfers, the main impact is that you won't need to share customer data with the recipient's bank, but you'll still need to comply with general anti-money laundering rules.
Are there tax implications for crypto transactions in Cyprus?
Currently, Cyprus does not charge capital gains tax on cryptocurrency sales or exchanges. This aligns with the country's broader policy on capital gains. However, Global Referral Group reported in 2025 that Cyprus is undergoing broader tax reforms that may introduce new rules for crypto trading. Always consult a tax professional for your specific situation.
What's the difference between CBC and CySEC's roles?
The Central Bank of Cyprus (CBC) oversees electronic money tokens (EMTs) and issues warnings about crypto risks. CySEC regulates all other crypto-assets and authorizes crypto-asset service providers (CASPs). Essentially, CBC handles the monetary aspects of crypto, while CySEC focuses on securities and market regulation. This dual structure ensures comprehensive oversight but can be confusing for businesses.
How can crypto businesses overcome banking challenges in Cyprus?
First, ensure full registration with CySEC as a CASP, which is required under the new regulations. Second, maintain meticulous records and demonstrate strong AML compliance. Third, consider working with specialized crypto-friendly banks outside Cyprus, though this requires additional compliance steps. Finally, leverage CySEC's Innovation Hub for guidance-they've helped over 200 businesses navigate these challenges since 2018.
What penalties apply for non-compliance with crypto banking restrictions?
Penalties for non-compliance can be severe. According to Eurofast's September 2025 update, businesses face fines of up to €5 million or 10% of annual turnover. Additionally, regulatory authorities may revoke licenses, freeze accounts, or impose other sanctions. The National Sanctions Unit, established in June 2025, has increased enforcement actions, with over 1,200 suspicious transaction reports processed since the Travel Rule implementation.