Central bank of Cyprus disapproves of cryptocurrencies

Without a hint of irony, the central bank of Cyprus warned citizens against cryptocurrencies, noting that such money is not government-backed, volatile and ripe for money laundering.

The bank does not go so far as to describe digital currencies — chiefly Bitcoin — as illegal, but “does not approve any activity that falls within its purview, unless it can ensure the legality of that activity.”

To quickly sum up the last year in Cyprus: The country accepted an EU bailout of about 10 billion euro, closed its second-largest bank, froze everyone’s bank accounts, then skimmed money off the top of uninsured accounts and insured accounts with deposits more than 100,000 euros.

Thus ensued a flight of capital out of the now ex-tax haven Cyprus in March and April, and much of that money went into Bitcoin specifically because it is not government-backed, and the digital currency’s value took off.

Until now, many thought of Cyprus as a Bitcoin haven. Even the University of Nicosia was accepting Bitcoin payments from students. (You can still go to North Cyprus and scoop up some luxury beachfront apartments under development with your Bitcoins.)

To be fair, many European countries are taking a similar stance on Bitcoin. The Cypriot central bank’s warning only seems funny given the full context: It was Cypriot decision-making, after all, that escalated Bitcoin’s value to the point that governments began to take notice.