Cyprus was long used as an offshore haven for fiat currencies, but the financial crisis of 2012-2013 culminated in massive levies on uninsured bank accounts in Cyprus with deposits of at least 100,000 euro.
That was in the spring of 2013, and the so-called “bail-in” shook many people’s confidence in the security of their fiat wealth. Bitcoin’s value against fiat currencies took off right around this same time, leading many to conclude there was a significant causal effect.
Since then, Cyprus has become a hotbed of Bitcoin and cryptocoin activity. The University of Nicosia began accepting Bitcoin tuition payments in 2013 — the first university in the world to do so.
Earlier this year, the university put forth a proposal to make Cyprus a global hub for Bitcoin trading and processing.
Also earlier this year, a Cypriot joint startup called Neo & Bee opened its first physical branch that gave the local Bitcoin economy at least an interface that resembled a traditional bank. However, problems have since arisen with Neo & Bee: Trading was halted this week over “questionable activity,” leading to Mt. Gox-like worries over liquidity issues.
To complicate matters, company founder Danny Brewster is no longer in Cyprus, and he has been conspicuously mum on what’s going on, citing among other reasons threats to his daughter.
As far as the legality of digital currencies in Cyprus is concerned, statements in February from the central bank indicate there is nothing to worry about. According to local newspaper the Cyprus Mail, “Bitcoin is not illegal, but at the same time neither is it subject to control or regulation,” unnamed sources from the central bank said.