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IMF Advises Cyprus Against Taxing Data Centres And Cryptocurrency Mining

In its latest economic assessment of Cyprus, the International Monetary Fund (IMF) has issued a strategic recommendation urging the Cypriot government to avoid imposing taxes on data centres and cryptocurrency mining. The IMF’s advice is rooted in a broader vision to position Cyprus as a hub for technological innovation and digital economy growth, rather than stifling these nascent industries with potentially burdensome taxes.

The IMF’s analysis underscores the importance of data centres and cryptocurrency mining as critical components of the digital economy, which Cyprus is increasingly looking to develop. Data centres serve as the backbone of the digital infrastructure, supporting everything from cloud computing to the storage and processing of vast amounts of information. Similarly, cryptocurrency mining, although controversial in some circles due to its environmental impact, represents a growing sector of the financial technology industry that has the potential to attract significant investment.

By advising against taxation, the IMF highlights the potential risks of discouraging investment in these industries at a time when Cyprus is seeking to diversify its economy and reduce its reliance on traditional sectors such as tourism and real estate. The IMF’s position suggests that premature or excessive taxation could deter international companies from establishing data centres in Cyprus or engaging in cryptocurrency mining operations, thereby missing an opportunity to position the island as a leader in the digital economy.

Instead, the IMF advocates for a regulatory environment that encourages innovation and investment. This approach includes creating incentives for companies to establish operations in Cyprus, offering support for research and development, and ensuring that the regulatory framework is flexible enough to adapt to the rapidly evolving nature of the technology sector.

For Cyprus, which is already positioning itself as a business-friendly jurisdiction with favourable tax policies, the IMF’s recommendation aligns with the broader national strategy of attracting foreign direct investment and fostering economic growth. The island nation, with its strategic location, robust legal framework, and skilled workforce, has the potential to become a regional hub for digital industries, provided that the right policies are in place.

Cyprus Hits Historic Tourism Peak As Overtourism Risks Mount

Record-Breaking Performance In Tourism

Cyprus’ tourism sector achieved unprecedented success in 2025 with record-breaking arrivals and revenues. According to Eurobank analyst Konstantinos Vrachimis, the island’s performance was underpinned by solid real income growth and enhanced market diversification.

Robust Growth In Arrivals And Revenues

Total tourist arrivals reached 4.5 million in 2025, rising 12.2% from 4 million in 2024, with momentum sustained through the final quarter. Tourism receipts for the January–November period climbed to €3.6 billion, marking a 15.3% year-on-year increase that exceeded inflation. The improvement was not driven by volume alone. Average expenditure per visitor increased by 4.6%, while daily spending rose by 9.2%, indicating stronger purchasing power and higher-value tourism activity.

Economic Impact And Diversification Of Source Markets

The stronger performance translated into tangible gains for the broader services economy, lifting real tourism-related income and overall sector turnover. Demand patterns are also shifting. While the United Kingdom remains Cyprus’ largest source market, its relative share has moderated as arrivals from Israel, Germany, Italy, the Czech Republic, the Netherlands, Austria, and Poland have expanded. This gradual diversification reduces dependency on a single market and strengthens resilience against external shocks.

Enhanced Air Connectivity And Seasonal Dynamics

Air connectivity has improved markedly in 2025, with flight volumes expanding substantially compared to 2019. This expansion is driven by increased airline capacity, enhanced route coverage, and more frequent flights, supporting demand during shoulder seasons and reducing overreliance on peak-month flows. Seasonal patterns remain prominent, with arrivals building through the spring and peaking in summer, thereby bolstering employment, fiscal receipts, and corporate earnings across hospitality, transport, and retail sectors.

Structural Risks And Future Considerations

Despite strong headline figures, structural challenges remain. The European Commission’s EU Tourism Dashboard highlights tourism intensity, seasonality, and market concentration as key risk indicators. Cyprus records a high ratio of overnight stays relative to its resident population, signalling potential overtourism pressures. Continued reliance on a limited group of origin markets also exposes the sector to geopolitical uncertainty and sudden demand swings. Seasonal peaks place additional strain on infrastructure, housing availability, labour supply, and natural resources, particularly water.

Strategic Investment And Market Resilience

Vrachimis concludes that sustained growth will depend on targeted investment, product upgrading, and continued market diversification. Strengthening year-round offerings, improving infrastructure capacity, and promoting higher-value experiences can help balance demand while preserving long-term competitiveness. These measures are essential not only to manage overtourism risks but also to ensure tourism remains a stable pillar of Cyprus’ economic development.

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