Cyprus Banking Restrictions on Crypto Transactions: What You Need to Know in 2026

If you're trying to move crypto in or out of Cyprus, you're not just dealing with a bank-you're navigating one of the strictest, most complex crypto regulatory environments in the EU. Despite Cyprus being known as a crypto-friendly hub, banking restrictions on crypto transactions have tightened dramatically since 2023. What used to be a relatively smooth process for crypto businesses is now a minefield of compliance checks, delayed transfers, and rejected accounts.

Why Cyprus Banks Are So Cautious About Crypto

Cyprus doesn’t ban crypto. In fact, it’s one of the few EU countries that doesn’t tax capital gains on crypto sales. But here’s the catch: banks aren’t required to work with crypto businesses. And most of them won’t.

The Central Bank of Cyprus (CBC) has been clear since 2022: cryptocurrencies are not legal tender. They’re not backed by the government. They’re not euros. And that’s enough for many banks to treat crypto clients like high-risk outliers-even if they’re fully licensed.

Even with over 87 registered crypto-asset service providers (CASPs) operating in Cyprus as of mid-2025, nearly 68% of crypto firms report trouble opening or keeping a bank account. Some get approved after months of paperwork, only to have their accounts frozen a year later without warning. Others never get past the first meeting with a bank compliance officer.

The reason? The EU’s Markets in Crypto-Assets (MiCA) regulation, which fully took effect in Cyprus by December 2024, forced banks to treat crypto firms like any other financial institution. That means stricter checks, more audits, and mandatory real-time verification for every transaction over €1,000.

The Crypto Travel Rule: How It Blocks Transactions

The biggest bottleneck isn’t the law-it’s the Travel Rule. Implemented in June 2025 under Cyprus’s amended AML law, this rule requires banks and crypto exchanges to share full identity details for every transaction above €1,000. That includes:

• Full name of sender and recipient
• Government-issued ID numbers
• Physical addresses
• Wallet addresses for both parties

If the recipient is using a self-hosted wallet (like MetaMask or Ledger), the bank must verify that wallet’s owner before approving the transfer. Most self-hosted wallets don’t have KYC data attached. So the bank blocks it.

This isn’t optional. Non-compliance can cost a bank up to €5 million or 10% of its annual turnover. So they err on the side of caution. A €2,000 transfer that used to clear in 10 minutes now takes 24-48 hours-sometimes longer if the recipient’s wallet is flagged as unverified.

Who Regulates What in Cyprus?

Cyprus doesn’t have one regulator for crypto-it has two, and they don’t always talk to each other.

• CySEC (Cyprus Securities and Exchange Commission) oversees all crypto exchanges, trading platforms, and asset tokens. If you’re running a crypto exchange in Cyprus, you must register with CySEC, prove you have at least €125,000 in capital, and maintain full AML procedures.
• Central Bank of Cyprus (CBC) controls electronic money tokens (EMTs) and sets rules for banks. They also require banks to screen all crypto transactions against EU and UN sanctions lists in real time.

This split creates confusion. A crypto firm might be fully licensed by CySEC, but still get turned down by a bank because the CBC hasn’t approved their risk profile. Banks don’t want to be the ones to let a sanctioned person slip through.

The result? Even legitimate businesses get caught in the middle. Some have spent over €50,000 on legal and compliance consultants just to get a single bank account.

Real-World Impact: What Happens When You Try to Deposit Crypto

Let’s say you run a crypto trading platform in Limassol. You’ve registered with CySEC. You’ve got your AML software. You’ve trained your staff. You’re ready to deposit your first €100,000 in euros.

Here’s what actually happens:

1. You approach your bank with your CySEC license and compliance documentation.
2. The bank asks for a list of all your clients’ identities and wallet addresses going back six months.
3. You provide it. They say they need to verify each one against the EU sanctions list.
4. Three weeks later, they say 17 wallets are flagged as "high risk" because they once received funds from a mixer service in 2023.
5. You argue those wallets were cleaned and verified. They say they still can’t approve the deposit.
6. You try another bank. Same process. Same result.

This isn’t rare. It’s standard. The Unit for Combating Money Laundering (MOKAS) received over 1,200 suspicious transaction reports from CASPs in just six months after the Travel Rule kicked in. Banks are drowning in alerts-and they’re not taking chances.

What’s Changed Since 2023?

Before MiCA, Cyprus was a hotspot for crypto startups. Low taxes, English-speaking staff, EU membership-it was ideal. But since 2023, three major changes have reshaped the landscape:

• The 2025 AML Amendment: Expanded the definition of "financial institution" to include CASPs, making them directly liable under EU anti-money laundering law.
• The National Sanctions Unit: Launched in mid-2025, this centralized body now reviews all crypto-related sanctions hits. Banks must route flagged transactions here before proceeding.
• Real-Time Beneficiary Verification: Banks now have 30 seconds to confirm the identity of the recipient before any crypto-related transfer. If they can’t, the transaction is blocked.

These aren’t minor tweaks. They’re systemic shifts. Cyprus went from being a crypto-friendly jurisdiction to one that’s crypto-*regulated*-with teeth.

How Businesses Are Adapting

Some companies are leaving. Others are adapting.

Many crypto firms now use payment processors like Wirex or BitPay that operate under EU licenses elsewhere. They route funds through Lithuania or Estonia, where banking relationships are more stable, then transfer euros to Cyprus via SEPA.

Others are turning to digital banks like Revolut or Wise, which have clearer policies on crypto. But even these aren’t foolproof. Revolut has closed accounts of crypto firms based in Cyprus after receiving alerts from EU regulators.

A few have gone fully decentralized-using on-chain protocols like Lightspark or Strike to bypass banks entirely. But that only works if your customers are also crypto-native. For B2B clients who need to pay in euros? You’re still stuck.

The Tax Advantage Still Exists-But It’s Not Enough

Yes, Cyprus still doesn’t tax capital gains on crypto. That’s a big deal. Many firms still move here for that reason.

But here’s the problem: you can’t spend what you can’t bank. If you can’t pay your staff, rent your office, or pay your taxes in euros because your bank account is frozen, the tax break doesn’t help.

Some companies are now relocating their operational HQ to Cyprus but keeping their banking in Malta or Portugal. It’s a workaround, not a solution.

What’s Next for Cyprus Crypto?

By 2027, Cyprus aims to have instant euro payments for all transactions-part of the EU’s Regulation (EU) 2024/886. That means faster, cheaper transfers… but only if they’re cleared by banks.

The CBC has launched its own Innovation Hub, signaling they want to work with crypto firms, not just regulate them. But progress is slow. Banks still don’t trust the technology. Regulators still don’t trust the banks.

The only certainty? The restrictions aren’t going away. They’re getting deeper.

If you’re thinking of setting up a crypto business in Cyprus in 2026, assume you’ll need:

• At least €100,000 in legal and compliance costs
• 6-12 months to get a bank account
• A backup banking plan in another EU country
• A team dedicated to monitoring sanctions lists and Travel Rule compliance

It’s still possible. But it’s no longer easy. And it’s definitely not cheap.