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Changes to the Regulation of the Crypto-Asset Sector in Lithuania – Launched on 1 November 2022

Amendments to the Law on the Prevention of Money Laundering and Terrorist Financing (hereinafter referred to as LPMLTF) relevant to the crypto-asset sector came into force on 1 November 2022.

The number of companies engaged in crypto-currency activities and the number of newly established companies has been growing extremely rapidly in Lithuania in the last few years. Eight new companies providing virtual currency services were established in the country in 2020, 188 companies in 2021, and more than 40 companies just in the first half of 2022.

Lithuania seems to be an attractive market for crypto-currency companies, not only because of the great interest of fintech companies and the companies and their branches established here, but also because of the talents, suitable start-up ecosystem, and support for businesses offered by public authorities.

The rapid growth of the crypto-asset market and the constant emergence of new products require additional attention from the responsible authorities in order to manage the risks associated with money laundering, the proper implementation of sanctions, as well as more detailed regulation of the operating conditions of service providers.

Taking this into account, amendments to the LPMLTF were adopted. It is important to note that from 1 November 2022:

  • Opening anonymous accounts or accounts under obviously fictitious names shall be prohibited;
  • Opening accounts or otherwise starting business relations without requesting the customer’s identity data, or when there is a reasonable suspicion that the data recorded in these documents are fake or falsified shall be prohibited;
  • The authorized capital of service providers is increased to 125 thousand Euros;
  • Carrying out activities and providing services in another country to such an extent that only functions or services that are not essential according to the nature of their activity remain in Lithuania and performing or providing them exclusively to customers of another country or, in principle, no longer carrying activities in Lithuania shall be prohibited;
  • Money laundering prevention officers and other leading employees cannot represent more than one company at the same time, except in cases where it is a group of companies, the aforementioned employees must be permanent residents of the Republic of Lithuania.

From 1 January 2023, the requirement for mandatory identification of customers will come into effect when the amount of transactions equals or exceeds 700 euros. From 1 February 2023, all virtual currency exchange operators and virtual currency depository wallet operators will be included in the public list of the Centre of Registers.

Some of the new regulatory changes in the Lithuanian crypto-asset sector, such as the minimum authorized capital requirement, can be considered as a prelude to the Markets in Crypto Assets regulation, MiCA, which is currently being finalized by the authorities of the European Union. The European Council approved the draft MiCa Regulation on 5 October 2022. It is expected that the Regulation will be officially approved in the first quarter of 2023 and its application will start by 2025.

The purpose of the MiCA Regulation is to regulate the issuance, public offering and trading of crypto-assets. The MiCA Regulation will establish a framework for the operational and management requirements of major cryptocurrency issuers and service providers, as well as comprehensive protection for cryptocurrency holders and customers of other service providers. A unified licensing regime in the EU will also be formed.