Quick Answer
Yes, cryptocurrency is legal in Cyprus but not legal tender.
- It is not legal tender, so businesses aren’t required to accept it.
- Crypto businesses must register with CySEC and follow AML/CFT laws.
Legal Status of Crypto in Cyprus
Cryptocurrency is legal in Cyprus, though it operates within a complex and evolving regulatory environment rather than being a fully unregulated gray area. This status exists because while crypto-assets themselves are not classified as legal tender, the government has established a clear legislative system focused on service providers. The primary regulatory body, the Cyprus Securities and Exchange Commission (CySEC), requires Crypto-Asset Service Providers (CASPs) to register and adhere to strict Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) laws. This framework is further shaped by EU directives and the upcoming Markets in Crypto-Assets (MiCA) regulation, which aims to harmonize rules across the European Union.
Current Regulations
Currently, cryptocurrency in Cyprus is regulated primarily under the Prevention and Suppression of Money Laundering Law, which was amended to align with EU directives. This legislation defines crypto-assets and mandates that all Crypto-Asset Service Providers (CASPs) register with the Cyprus Securities and Exchange Commission (CySEC) and adhere to strict AML/CFT obligations. Furthermore, CySEC has issued specific guidance, like Circular C417, requiring investment firms to manage risks and obtain authorization for crypto-related activities. This framework ensures consumer protection and market integrity as Cyprus prepares for the full implementation of the EU's Markets in Crypto-Assets (MiCA) regulation.
Regulatory Authorities
Several regulatory bodies in Cyprus and the EU share the responsibility of overseeing the crypto landscape.
- Cyprus Securities and Exchange Commission (CySEC): As the primary supervisory authority, CySEC is responsible for registering, licensing, and regulating Crypto-Asset Service Providers (CASPs). It enforces compliance with AML/CFT laws and issues directives on risk management and capital adequacy for crypto-related activities.
- Central Bank of Cyprus (CBC): The CBC issues warnings about the risks associated with cryptocurrency, such as price volatility and security, and clarifies that crypto is not legal tender in the country. It also sets broader AML directives for the financial sector that can impact institutions interacting with crypto entities.
- Unit for Combating Money Laundering (MOKAS): This is Cyprus's financial intelligence unit, which plays a crucial role in AML enforcement. All CASPs are required to report suspicious transactions directly to MOKAS to help combat financial crime.
- European Banking Authority (EBA): The EBA publishes EU-wide guidelines on money laundering and terrorist financing risks that apply to all financial institutions, including CASPs. These guidelines help harmonize compliance standards and risk assessment measures across member states like Cyprus.
Historical Context
Cyprus's crypto regulation began cautiously. In 2018, CySEC started by regulating crypto derivatives, followed by rules for investment firms in 2020 via Circular C417. A major policy shift occurred in 2021 when Cyprus amended its AML law to formally regulate Crypto-Asset Service Providers (CASPs), requiring them to register with CySEC. This move formalized the sector, boosting transparency and investor confidence. The latest evolution is the transition to the EU’s comprehensive Markets in Crypto-Assets (MiCA) regulation, which began in 2023. This harmonizes rules across the EU, solidifying Cyprus's position as a regulated crypto hub while increasing compliance demands.
Compliance Requirements for Businesses in Cyprus
Businesses in Cyprus, particularly those in the crypto space, must navigate a detailed set of compliance rules based on national law and EU directives. Government guidance outlines these obligations, with recent updates from the Central Bank of Cyprus introducing a more flexible, risk-based approach. Here’s a summary of the essential procedures:
- Anti-Money Laundering (AML) Checks: Core obligations include performing Customer Due Diligence (CDD) to verify identities, conducting ongoing transaction monitoring, and assessing client risk. A new risk-based directive allows for simplified procedures for low-risk clients, but the strict requirement to report all suspicious transactions to the financial intelligence unit (MOKAS) remains firmly in place.
- Know Your Customer (KYC) Requirements: As a key part of CDD, KYC involves verifying the identity of customers and their beneficial owners. The process has become more flexible, with regulators now permitting the use of ID copies and the reuse of previously obtained information. According to AML/CFT compliance guidelines, Crypto-Asset Service Providers (CASPs) must perform these checks for transactions valued at €1,000 or more.
- Sanctions Screening and Record-Keeping: Firms must screen customers, beneficial owners, and related parties against EU and UN sanctions lists in real-time before onboarding or processing transactions. It is also mandatory to maintain detailed records and audit trails of all compliance activities, from CDD to transaction monitoring.
- Internal Policies and Registration: Companies are required to establish robust internal AML/CFT policies, provide regular staff training, and cooperate with supervisory authorities. CASPs face an additional requirement to register with CySEC and adhere to the EBA’s Travel Rule Guidelines to ensure full compliance.
Why this matters for Cross-Border Payments
For businesses conducting cross-border payments between Cyprus and India, these regulations introduce both legitimacy and friction. The stringent AML/CFT framework in Cyprus provides a secure and regulated channel, but it also creates significant operational hurdles. Businesses may face delays and increased compliance costs due to rigorous KYC checks, transaction monitoring, and sanctions screening mandated by CySEC. The primary pain point is navigating the complexities of two distinct regulatory environments, which can slow down transactions and increase administrative burdens.
How Lightspark Enables Compliant Crypto-Native Payments
Lightspark offers a global payment network, the "Money Grid," built on Bitcoin to make money move like information. Its two main products, Lightspark Connect and Grid Switch, provide access to this network. Connect is for businesses using native Bitcoin, abstracting Lightning Network complexities. Grid Switch enables institutions to use domestic real-time payment systems for instant, low-cost cross-border transfers without directly handling cryptocurrency, offering flexibility based on operational and regulatory needs.
These features address the friction of cross-border payments by offering a faster, more efficient alternative. For regulated institutions navigating complex AML/CFT rules like those in Cyprus, Lightspark provides tools that facilitate compliance. Features such as audit-ready reporting and support for the Universal Money Address (UMA) protocol help businesses meet their own stringent record-keeping and monitoring obligations, streamlining operations within their regulatory framework.
To see how Lightspark’s Money Grid can transform your cross-border payment strategy, learn more.
Notice: This article is provided for informational purposes only and does not constitute legal advice.
Sources
- “AML/CFT Compliance Guidelines For Cyprus.” AML Watcher, amlwatcher.com/our-coverage/cyprus/.
- “Central Bank of Cyprus Introduces Risk-Based AML Directive.” AML Watcher, 6 May 2025, amlwatcher.com/news/the-central-bank-of-cyprus-introduces-new-aml-directive-focused-on-risk-based-compliance/.
- Charalambous, Emilios, and Alexandros Neofytou. “Legal Considerations in Crypto Investments and Everyday Transactions.” Lexology, 20 Feb. 2025, www.lexology.com/library/detail.aspx?g=dd576cb1-68a9-4e2c-8731-2fcd6f2bb2f9.
- Chrysostomides Advocates & Legal Consultants. “CMS Expert Guide to Crypto Regulation in Cyprus.” CMS Law, CMS Legal, 15 Nov. 2024, cms.law/en/int/expert-guides/cms-expert-guide-to-crypto-regulation/cyprus.
- “Cyprus Crypto License - Cyprus Crypto Tax & Regulation.” Gofaizen & Sherle, gofaizen-sherle.com/crypto-license/cyprus.
- “Cyprus Cryptocurrency Laws and Regulations.” Freeman Law, Freeman Law PLLC, freemanlaw.com/cryptocurrency/cyprus/.
- Georgiou, Jordan. The Advancement of the Blockchain and Cryptocurrency industry in Cyprus. 17 Nov. 2021, www.gov.cy/media/sites/11/2024/04/advancement_blockchain_crypto_cyprus.pdf. PDF document.
