Cyprus Banking Restrictions on Crypto Transactions: What You Need to Know in 2025
Nov, 7 2025
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When you think of Cyprus and cryptocurrency, you might picture sunny beaches, low taxes, and a welcoming environment for crypto businesses. But behind the scenes, the country’s banks have quietly tightened the screws on crypto transactions. If you’re running a crypto exchange, holding digital assets, or even just sending Bitcoin from a Cyprus bank account, you’re dealing with one of the strictest crypto banking regimes in the EU - even if it doesn’t feel like it.
Why Cyprus Banks Are Tightening the Noose on Crypto
Cyprus doesn’t ban crypto. In fact, it’s one of the few EU countries that doesn’t tax capital gains from selling Bitcoin or Ethereum. That’s a big draw. But here’s the catch: just because you can trade crypto without paying tax doesn’t mean you can move it freely through a bank. The real story isn’t about banning crypto. It’s about control. Since 2023, Cyprus has been forced to align with the EU’s Markets in Crypto-Assets (MiCA) regulation. That’s not optional. Every EU member state had to adopt it. But Cyprus didn’t just follow the rules - it went further. Banks now have to treat crypto businesses like high-risk clients, even if they’re fully licensed. The Central Bank of Cyprus (CBC) made it clear: cryptocurrency is not legal tender. That means no bank has to accept it. And most won’t. Even if you’re a registered crypto service provider with CySEC, getting a bank account is still a battle. A Q2 2025 survey by the Cyprus Blockchain Association found that 68% of local crypto firms struggled to open or keep a bank account. That’s not a glitch. It’s policy.The Travel Rule: How Every Crypto Transfer Gets Tracked
If you send more than €1,000 in crypto from Cyprus, the bank doesn’t just check your ID. It checks both sides of the transaction. This is called the Travel Rule - a rule from the Financial Action Task Force (FATF) that Cyprus implemented in June 2025 through a major overhaul of its anti-money laundering laws. Under this rule, every transaction above €1,000 must carry full identity data: sender name, address, ID number, and recipient details. If the recipient is using a self-hosted wallet (like MetaMask or Trust Wallet), the bank must verify that person’s identity too. No exceptions. This isn’t just paperwork. It’s technical. Banks now have to integrate with blockchain analytics tools to trace wallet addresses. Payment processors like Sumsub and Coinfirm report that transaction times have increased by 15-20 seconds per crypto transfer. For businesses doing hundreds of transactions a day, that’s hours of delay. And if the recipient’s identity can’t be verified? The transaction gets blocked.Who’s Watching What: CySEC vs. the Central Bank
Cyprus has a split system. The Cyprus Securities and Exchange Commission (CySEC) handles crypto exchanges, NFT platforms, and token issuers. The Central Bank of Cyprus (CBC) handles everything else - especially electronic money tokens (EMTs) and bank interactions. As of Q2 2025, CySEC had registered 87 crypto-asset service providers (CASPs). That’s more than most EU countries. But registration doesn’t mean easy banking. Banks still treat these firms as high-risk. Why? Because CySEC’s oversight doesn’t override the CBC’s banking rules. A company can be fully licensed by CySEC and still be denied a bank account. The CBC requires banks to:- Perform enhanced due diligence on any customer linked to a crypto business
- Screen all crypto transactions against EU and UN sanctions lists in real time
- Keep full audit trails of every crypto-related transfer for at least five years
- Refuse service if a client uses unverified self-hosted wallets
Penalties Are No Joke
Fines for non-compliance aren’t theoretical. Eurofast’s September 2025 report says banks that fail to verify beneficiaries before processing crypto payments face penalties of up to €5 million - or 10% of their annual turnover, whichever is higher. That’s not a slap on the wrist. That’s a business-ending penalty. So banks play it safe. They reject risky clients. They delay transactions. They ask for more documents than you’d need to open a mortgage. The Unit for Combating Money Laundering (MOKAS) received over 1,200 suspicious transaction reports from crypto firms just in the first three months after the Travel Rule went live. That’s not because everyone’s laundering money. It’s because the system flags anything unusual - and now, almost everything involving crypto is unusual.What This Means for You
If you’re an individual holding crypto in Cyprus:- You can still buy and sell crypto on licensed exchanges
- You won’t pay capital gains tax
- But if you try to withdraw to a bank account, expect delays, extra questions, and possible rejection
- Register with CySEC - it’s mandatory
- Build your AML/CFT policies now - they’re not optional
- Assume you’ll need a third-party payment processor, not a direct bank account
- Prepare for KYC on every customer - even small ones
The Bigger Picture: Cyprus Is Trying to Have It Both Ways
Cyprus wants to be the Singapore of Europe for crypto - low tax, strong regulation, easy access. But it’s also part of the EU, which demands zero tolerance for financial crime. The result? A system that looks friendly on paper but feels restrictive in practice. The Innovation Hubs at CySEC and the CBC are trying to help businesses adapt. But they can’t force banks to take risks. The future? By 2027, experts predict 95% of crypto transactions in Cyprus will go through licensed CASPs. That’s up from 78% in early 2025. Banks won’t disappear from the picture - they’ll just become gatekeepers, not partners. And if you think this is unique to Cyprus? Think again. Germany, France, and Italy are moving the same way. Cyprus is just ahead of the curve.What’s Next for Crypto in Cyprus
The big shift coming in 2027 is instant euro payments. Regulation (EU) 2024/886 requires all banks in the EU to offer instant SEPA transfers. Cyprus is ahead of schedule on this - and that’s a good sign. It means the government is serious about digital finance. But instant payments won’t fix the crypto problem. They’ll just make it faster. The same rules will apply. The same checks. The same delays. The real question isn’t whether Cyprus will become a crypto hub. It’s whether any bank in the country will be willing to touch it. Right now, the answer is: only if you jump through every single hoop - and even then, it’s not guaranteed.Can I still use my Cyprus bank account to buy crypto?
Yes, but only through licensed exchanges. You can deposit euros and buy crypto on platforms like Bitpanda or Kraken that are registered with CySEC. But if you try to send crypto directly from your bank to a personal wallet, the bank may block it unless you provide full recipient details. Most banks won’t allow direct crypto withdrawals at all.
Do I have to pay tax on crypto profits in Cyprus?
No. Cyprus does not impose capital gains tax on cryptocurrency sales or exchanges. This remains one of the country’s biggest advantages for crypto investors. However, if you’re a business trading crypto as part of your operations, income tax may apply. Always check with a local tax advisor.
Why do banks in Cyprus refuse to work with crypto companies?
Because the risk is too high. Even licensed crypto firms are seen as high-risk under EU anti-money laundering rules. Banks face fines up to €5 million if they fail to verify transactions. Most choose to avoid the headache entirely. It’s not personal - it’s legal liability.
What’s the Travel Rule, and how does it affect me?
The Travel Rule requires all crypto transfers over €1,000 to carry sender and recipient identity data. If you’re sending crypto from a Cyprus bank or exchange, you’ll need to provide the recipient’s full name, address, and ID. If they’re using a self-hosted wallet, you must prove their identity - or the transaction gets blocked.
Can I open a bank account for my crypto startup in Cyprus?
It’s possible, but extremely difficult. You need to be fully registered with CySEC, have a detailed AML/CFT plan, and prove you’re not a shell company. Even then, most banks will require you to use a third-party payment processor. Many startups end up opening accounts in Estonia, Lithuania, or Malta instead.
Is Cyprus still a good place for crypto businesses?
It depends. If you need low taxes and EU market access, yes. But if you need easy banking, no. Cyprus is a regulatory hub, not a banking hub. The best strategy is to register with CySEC, use a licensed payment processor, and keep your banking operations outside Cyprus - in a jurisdiction like Estonia or the Netherlands that still offers bank access to crypto firms.