In late November, the presidential campaign in the Republic of Cyprus hadn’t officially started—but at the headquarters of the fintech startup ecommbx, in central Nicosia, the battle for voters was already underway. At a Q&A with the company’s employees, the guest of honor was Nikos Christodoulides, a former diplomat who’d been leading the polls for several months.
The presence of a presidential hopeful in the offices of a five-year-old startup underscored the importance of the financial technologies sector to the economy of this small nation in the eastern Mediterranean that has bet on innovation to power its economic growth after securing a bailout a decade ago.
After a banking collapse in 2013, alternative kinds of financial services blossomed in Cyprus, thanks to a supportive regulatory environment. Crypto companies found fertile ground here; some high-end hotels in Limassol, the country’s second-largest city and a buzzling business hub, now accept payments via digital crypto wallets. Binance, the world’s largest crypto exchange, intends to open a Cyprus office.
The pace of fintech activity is something of a contrast to other parts of the economy. The decade-long recovery under president Nicos Anastasiades has been pockmarked with corruption scandals. The bad loans of the early 2010s linger still. Credit agencies are looking to the next government to see whether their cautiously positive outlook for the country is justified.
The Cypriot economy has been struggling with 30-year high inflation. A labor dispute over a cost of living adjustment in public sector contracts, that prompted a general strike last month, is also simmering. Cyprus may be a small country, but the new president, whoever they are, will have their hands full.
Cyprus picks its next president
Fourteen candidates are running for the presidency, a record number for this country of 1.2 million people. The 560,000-odd registered voters will go to the ballots on Feb. 5. If no candidate wins 50% of the vote, as seems, the top two will run off a week later.
Anastasiades cannot run again, having served two consecutive terms in power. But he looms large over the vote.
The frontrunners all have ties to Anastasiades. Christodoulides left his role as the minister of foreign affairs to run as an independent backed by centrist parties. Anastasiades’s conservative Democratic Rally (DISY) is fielding Averof Neofytou, the party’s president. The main opposition party, the leftist Progressive Party of Working People (AKEL), is backing Andreas Mavroyiannis, a diplomat running as an independent. Mavroyiannis presents himself as an agent of change, although he served as Anastasiades’s main negotiator in the Cyprus peace talks from 2013 until he announced his candidacy last year.
Nicosia is Europe’s last divided capital. Barbed wire, UN peacekeepers, and a giant Northern Cypriot flag carved into the side of a mountain overlooking the city serve as reminders of the 1974 partition of the island, following Turkey’s invasion of the north after a Greek-supported military coup. In 1983, the northern government unilaterally declared independence as the Turkish Republic of Northern Cyprus (TRNC), but it was not recognized by the international community.
Every candidate in the upcoming election has pledged to resume peace talks. Coincidentally, two of the conflict’s other stakeholders, Greece and Turkey, are due to hold elections in the coming months. But Ersin Tatar, TRNC’s president, insisted as recently as last month on a two-state solution, even as the UN pushed for a bi-communal federation.
Cyprus’s unique position
Cyprus forms the southernmost border of the European Union, so it gains some advantages. It is the first port of call for Israeli companies dipping their toes into the EU market, as Marios Tannousis, the deputy director general of Cyprus’s investment agency, told Quartz. “I see Cyprus as complimentary, not competitive to Israel,” he said, branding Cyprus as a haven of stability in a difficult region.
But its location also puts Cyprus in the crossroads of various asylum seekers’ routes. The country is struggling to deal with some of the highest rate of asylum applications per capita in Europe, with the largest number coming from Syria, Afghanistan, and Turkey. Anastasiades’s government has blamed a surge in illegal migration on the TRNC, which is accused of allowing people to illegally cross the Green Line dividing the island.
Russia’s war in Ukraine has also put Cyprus in a delicate spot. For years, the country’s low tax and flexible immigration environment had attracted Russian investors. This earned the island dubious epithets such as “Moscow on the Med” and “Limassolgrad,” the latter highlighting the connection between Cyprus’s second-largest city and Russian money. Driving from Limassol to the Larnaka airport on the eastern coast, it isn’t unusual to see road signs in Cyrillic. Cyprus has stuck with the EU in siding with Ukraine over Russia, welcoming thousands of Ukrainian refugees since the invasion. But over the past year, several pro- and anti-Russian demonstrations have erupted on the island.
A “golden passport” scandal that marred Anastasiades’s second term played a large role in bringing Russian money to Cyprus. The scheme offered Cypriot citizenship—and therefore visa-free access to the EU—to anyone investing a minimum of $2.5 million in the country. (Jho Low, the fugitive financier behind Malaysia’s 1MDB scandal, obtained a Cypriot passport through this scheme.) A 2020 Al Jazeera investigation found that several passport recipients between 2017 and 2019 were so-called politically exposed persons, a category of people at risk of corruption because of their and their families’ ties to government officials. According to Al Jazeera, at least 1,000 Russians received Cypriot citizenship in this way. Cyprus has since suspended the scheme and rescinded passports awarded to some oligarchs.
Even legitimate investment into Cyprus faces its own challenges. Corporate leaders who spoke to Quartz named a lack of affordable housing and schooling for their international workforce as among their main obstacles in expanding their business.
Beyond the scandals
The controversies surrounding golden passports have overshadowed some of Cyprus’s recent success stories. The country has quietly nurtured a biotech industry that not only came in handy during the pandemic by providing lab expertise and capability but also attracted foreign investors. NIPD Genetics, a company launched in 2010 by geneticist Philippos Patsalis with the support of Cyprus’s investment agency, focuses on DNA testing. Last year, it was acquired by Swedish healthcare and diagnostics company Medicover.
Already known for its beaches, Cyprus is also looking to attract tourists to other parts of the island. This week, Anastasiades celebrated the construction of a new skiing resort in the Troodos mountains, close to Mount Olympos, where the skiing season is usually three-months long.
Another ambitious project is close to completion on the eastern side of the mountains. An observatory, designed to look like a spaceship that has made a hasty landing on Earth, is due to open in April. The family-run architecture studio behind the observatory, Kyriakos Tsolakis Architects, has never tackled a project of this kind before.
“There’s no books on how to build an observatory, but now I can write one,” said Elena Tsolakis, an architect at the studio founded by her father. They hope the Troodos observatory will prove a boon for the local community, who have eagerly followed its development, preparing for the region’s next chapter.
Reporting on this story was made possible thanks to a press trip sponsored by Invest Cyprus.