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

When you try to move money between a crypto exchange and a bank in Cyprus, you might hit a wall. It’s not because crypto is banned. It’s because the rules changed-dramatically-and banks are now forced to treat crypto transactions like high-risk wire transfers. If you’re running a crypto business or just holding digital assets in Cyprus, understanding these restrictions isn’t optional. It’s the difference between smooth operations and frozen accounts.

Why Cyprus Changed the Rules

Cyprus used to be one of the friendliest places in Europe for crypto businesses. Low taxes, English-speaking staff, and a streamlined registration process drew companies from all over. But in 2023, everything shifted. The EU’s Markets in Crypto-Assets (MiCA) regulation came into force, and Cyprus had to align its laws. This wasn’t a local decision-it was a legal requirement. Suddenly, every bank, payment provider, and crypto exchange had to follow the same strict rules as banks handling wire transfers.

The trigger? Money laundering risks. The European Central Bank and the Financial Action Task Force (FATF) pushed member states to close loopholes. Cyprus responded by passing the Prevention and Suppression of Money Laundering from Illegal Activities (Amendment) (No. 2) Law of 2025. This law redefined crypto-asset service providers (CASPs) as financial institutions. That meant banks had to treat them like any other high-risk client-subject to full due diligence, real-time monitoring, and mandatory reporting.

The Travel Rule: The Biggest Hurdle

The most impactful change? The Travel Rule. Under EU Regulation (EU) 2023/1113, any crypto transaction over €1,000 must carry full sender and receiver data. That includes names, addresses, ID numbers, and account details. This data must travel with the funds-just like a bank wire.

For banks, this isn’t a suggestion. It’s mandatory. If a crypto transfer comes in without this data, the bank must block it. No exceptions. Even if the sender is a known customer, if the recipient is a self-hosted wallet (like a personal MetaMask), the bank has to stop the transaction until identity verification is complete.

According to AGP Law’s September 2025 analysis, this single rule has caused a 40% spike in declined transactions across Cypriot banks. Many users don’t realize their wallet doesn’t have the right data attached. And banks aren’t allowed to guess or assume-they have to verify everything.

Who’s in Charge? CySEC and the Central Bank

Cyprus didn’t create one regulator. It split oversight. The Cyprus Securities and Exchange Commission (CySEC) is the primary authority for authorizing and supervising crypto-asset service providers (CASPs). Any exchange, custodian, or trading platform operating in Cyprus must register with CySEC, prove they have enough capital, and show they have AML procedures in place. As of Q2 2025, CySEC had registered 87 CASPs.

Meanwhile, the Central Bank of Cyprus (CBC) controls how traditional banks interact with crypto. The CBC doesn’t regulate crypto itself-it regulates the banks that touch it. That’s why even if a crypto company is fully licensed, a bank can still refuse to open an account. The CBC requires banks to:

• Perform enhanced due diligence on all CASPs they work with
• Verify the identity of counterparties in every crypto transaction
• Screen all transfers against EU and UN sanctions lists
• Keep detailed audit trails for at least five years

The CBC also explicitly states that cryptocurrency is not legal tender. That means no business in Cyprus is legally required to accept Bitcoin, Ethereum, or any other crypto as payment. Banks use this as a reason to avoid exposure-regardless of licensing.

Real-World Impact: What Businesses Are Facing

A Q2 2025 survey by the Cyprus Blockchain Association found that 68% of crypto businesses struggled to open or keep a bank account. Some lost accounts overnight when their bank reviewed their transaction history and flagged too many crypto-related transfers.

Here’s what’s happening on the ground:

• Transaction delays: Real-time beneficiary verification adds 15-20 seconds per transaction. For high-volume exchanges, that’s hours of backlog.
• Account closures: Banks are terminating relationships with CASPs that don’t have full CySEC registration or have high-risk clients.
• Increased costs: Compliance teams now need dedicated staff to handle AML filings, sanctions checks, and audit logs. Small firms are spending 20-30% of revenue just on compliance.

The Unit for Combating Money Laundering (MOKAS) received over 1,200 suspicious transaction reports from CASPs after the Travel Rule went live in June 2025. That’s not because everyone is breaking the law-it’s because the system is now watching everything.

What You Can’t Do Anymore

Here are the three biggest restrictions that caught people off guard:

1. No direct deposits from self-hosted wallets: If you try to send ETH from your personal wallet to a Cypriot bank account, the bank will likely reject it unless you can prove the wallet belongs to you and provide full KYC data.
2. No anonymous crypto-to-fiat swaps: Even if you use a licensed exchange, if you’re not fully verified, you can’t cash out. Exchanges now lock withdrawals until ID, proof of address, and source of funds are confirmed.
3. No bulk crypto payments: Businesses that used crypto for payroll or vendor payments now need to convert to euros first. Banks won’t accept deposits from multiple crypto sources unless each one is individually verified.

What’s Still Allowed

Despite the restrictions, Cyprus still has advantages:

• No capital gains tax: If you sell Bitcoin or Ethereum for profit, you pay zero tax. This hasn’t changed.
• Legal registration: You can still register a crypto business with CySEC. Over 87 have done it.
• EU market access: Once registered, your business can operate across the EU under MiCA’s passporting rules.
• Instant euro payments: By 2027, all banks must offer instant SEPA transfers. This makes converting crypto to euros faster than ever-once the money clears.

The key is working within the system. Use a licensed CASP. Keep your KYC documents updated. Don’t try to bypass the Travel Rule. The penalties are severe: up to €5 million or 10% of annual turnover.

How to Stay Compliant

If you’re a business in Cyprus, here’s what to do right now:

1. Register with CySEC if you’re handling crypto assets.
2. Implement a full AML/CFT policy with staff training and internal audits.
3. Use only CASPs that are verified by CySEC for all transactions.
4. Never send crypto to unverified wallets-especially self-hosted ones.
5. Keep records of every transaction, including wallet addresses and verification logs.
6. Work with a compliance consultant familiar with MiCA and Cyprus’s 2025 amendments.

For individuals: Only use licensed exchanges. Don’t try to move crypto directly into your bank account. Convert to euros first, then transfer.

The Future: Tighter Controls, Not Less

Cyprus isn’t backing down. In fact, it’s doubling down. The National Sanctions Unit launched in late 2025 gives the government centralized power to freeze crypto assets linked to sanctioned individuals. Banks now have real-time access to this database.

By 2027, experts predict 95% of crypto transactions in Cyprus will go through registered CASPs. That’s up from 78% in early 2025. The goal isn’t to kill crypto-it’s to make every transaction traceable. The government sees this as a way to attract legitimate businesses while pushing out bad actors.

The message is clear: You can still do crypto in Cyprus. But you have to do it the right way. No shortcuts. No gray zones. Just full transparency.

If you’re planning to move crypto in or out of Cyprus, remember: the rules aren’t going away. They’re getting stricter. Your best move? Play by the book. Use licensed services. Keep records. And never assume a bank will accept crypto without proof.