Speaking with the Cyprus Mail, a representative of the Central Bank of Cyprus confirmed that Bitcoin is perfectly legal in the country. “Bitcoin is not illegal, but at the same time neither is it subject to control or regulation,” said an unnamed spokesperson for the central bank. The timing of the confirmation is key, as “Bitcoin bank” Neo launched in Cyprus earlier this week.
The confirmation of Bitcoin’s status carries more weight in Cyprus than it would in most countries. In the wake of last year’s debt crisis, Cyprus was forced into bailout deal that resulted in the universal seizure of funds from all the country’s bank deposits. Depositors lost between 6.7% and 40% of their funds in this extremely controversial “bank deposit levy,” which also resulted in the closure of the country’s second largest bank. As a result, many Cypriots have become increasingly skeptical about their country’s banking system.
With the launch of Neo (and sister company Bee), however, many in Cyprus finally have a meaningful alternative to the state-controlled banking system. That said, today’s concession that Bitcoin isn’t illegal shouldn’t be seen as an endorsement of the cryptocurrency by Cypriot regulators. Central Bank of Cyprus has twice issued statements about virtual currency risks, and has discouraged Cyprus Stock Exchange and the Securities and Exchange Commission (CySEC) from dealing in Bitcoin-based derivatives.
In a Feb. 7 statement, the Central Bank of Cyprus made it absolutely clear that virtual currencies were on notice in the country, and that Bitcoin was not to be considered legal tender in the country.
The CBC does not authorise any activity falling within its mandate unless legal compliance is ensured. Any activity without the required license is liable for breach of law.
The most recent update from the central bank appears to be an acknowledgement that it’s currently powerless to regulate Bitcoin. According to the Cyprus Mail:
The Central Bank seems not to know what exactly to do with bitcoin, which is classed neither as a currency in the conventional sense, nor as a financial instrument – and hence is beyond the realm of regulation. And when it comes to virtual currencies, Cyprus law draws a blank.
“It’s a grey area,” an official at the Central Bank said.