Bitcoin, the decentralized digital currency, has come into use in Cyprus during the ongoing banking crisis. It is used as a way to get personal and corporate savings out of the country without the need to go through the typical banking process, thus avoiding the excruciating taxes levied by the EU.

Since the financial crisis hit most major markets around the world back in 2008, many options have come up to reduce transaction costs and taxes imposed by government and financial entities. Bitcoin reached a certain level of popularity when it began to be used in online gambling, although it’s been a long road for players to fully embrace the new internet currency.

With the latest taxes and withdrawal restriction from the Cyprus government, bank customers can barely take a small amount out of their deposits, and some accounts have been decreased by almost 40% due to taxes.

The Bitcoin currency is widely used for e-commerce transactions and online gambling, and is now becoming widely popular among EU countries where the crisis has hit the most, i.e. Greece, Spain and now Cyprus. The online currency has soared up to $87 per coin, representing a five-fold increase since 2012.

Nicholas Colas, chief market strategist at ConvergEx, commented that incremental demand for Bitcoin is coming from the geographic areas most affected by the Cypriot financial crisis - individuals in countries like Greece or Spain, worried that they will be the next to feel the threat of deposit taxes.

On the Bitcoin currency being used for international transactions, Christopher Vecchio, a DailyFX analyst, explained: It is a clear sign that people are looking for alternative ways to get their money out of the country. If we’re going to talk about the stability of the euro and whether or not there are going to be capital controls in place, not just in Cyprus but around the euro zone, I think there is some efficacy behind bitcoins as an alternative liquidity vehicle.

Nevertheless, most financial advisors claim that this form of transaction is unregulated and may end up diluting people’s money into oblivion, adding that other forms of money, such as gold, may be more appealing in the medium to long-run.