Cryptocurrency transactions conducted for personal use are not subject to taxation. However, transactions carried out as part of business activities are subject to income tax regulations.

Additionally, profitable sales of cryptocurrencies are subject to capital gains tax, unless the cryptocurrency is classified as a commodity.

According to market analysts, "Funds raised through an Initial Coin Offering are considered taxable income. Cyprus has one of the lowest and most attractive corporate tax rates at 12.5% compared to other European countries."

However, transferring cryptocurrencies between investment wallets or accounts is not taxed. Tax obligations arise only when crypto assets are liquidated, and the tax is calculated based on the profit gained.

A market analyst told Brief that "a 12.5% tax rate applies to profits from the trading of cryptocurrencies with a commercial nature. However, in some cases, crypto-related profits are classified as capital gains and are not taxed. This depends on the trading signals of each company."

The same analyst explained, "If a company's primary activity is cryptocurrency trading, it is subject to the regular corporate tax rate. However, if cryptocurrencies are held for investment purposes, they are not taxed."

Tax regulations are determined by the Tax Commissioner and outlined in a circular. Cyprus is considered crypto-friendly as it does not impose capital gains tax on cryptocurrency transactions.

Due to anti-money laundering (AML) legislation, EU member states are required to ensure that crypto service providers comply with all regulations governing cryptocurrency transactions.

In Cyprus, the Cyprus Securities and Exchange Commission (CySEC) is the designated regulatory authority for matters related to cryptocurrency.

Meanwhile, the Central Bank of Cyprus, according to a relevant source, advises the public to exercise caution when investing in crypto assets due to risks, financial losses, and potential fraud.