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Crypto License in Lithuania

Inteliumlaw » Crypto licenses » Crypto License in Lithuania

Lithuania stands among the favored European jurisdictions for establishing crypto businesses. The country's regulatory framework was instituted in January 2020. After that Lithuania witnessed a surge in crypto-asset companies in Lithuania crypto license register. Then a robust strengthening of the regulation in 2022 by a joint initiative of the Bank of Lithuania, the Ministry of Finance, and the Financial Crime Investigation Service (FCIS or FNTT (Lithuanian: Finansinių nusikaltimų tyrimo tarnyba)), reasonably resulted in a temporary decrease in cryptocurrency projects setups. However, in 2023 the number of crypto companies started to grow in Lithuania again. It just confirms the fact that even after tightening the regulation of crypto activity the Lithuania crypto license requirements remain quite loyal and attractive. The competitive drive between Lithuania and Estonia for the status of a leading 'crypto hub' in the EU motivates Lithuania to maintain a flexible and cost-effective regulatory environment, offering an edge over Estonia. In addition, due to its initiatives and efforts Lithuania crypto license is positioned as a top choice for crypto ventures, ranking second in the EU for registered crypto-asset companies after Poland.

Let’s go through the Lithuania's Regulatory Regime for crypto activities.

Although the term "crypto license in Lithuania" is commonly used, the country does not possess a licensing regime specifically tailored for crypto asset providers. Instead, the current regulatory landscape functions on an "authorization" principle, allowing crypto businesses to operate without stringent licensing obligations. For the sake of simplicity in this context, in this article we will refer to this regime as the "Lithuanian crypto license". Thus, Lithuania crypto license here should be considered as the authorization procedure essential for every virtual asset service provider in Lithuania before offering crypto-related services.

Legislative Frameworks Guiding Crypto Business Activities in Lithuania, notably include:

The Law on the Prevention of Money Laundering and Terrorist Financing No. VIII-275 serves as the primary legislation governing virtual asset service providers. Amendments to this law, XIV-1374, introduced new provisions in June 2022 (the strengthening ones we mentioned above), with some coming into effect on November 1, 2022.

Under the applicable regulation for virtual asset service providers, authorization through a registration process is mandatory before offering crypto-related services. The company shall specify the respective type of crypto activity it plans to conduct during the registration process at the Register of the companies. Each crypto business should inform the Register of Legal Entities of the Republic of Lithuania on the commencing of the respective crypto activity.

Currently, there are two primary crypto licenses (authorization) types in Lithuania:

A single entity can hold both the crypto exchange and wallet operator licenses (authorizations) in Lithuania.

Virtual currency exchange and custodian wallet operators in Lithuania must adhere to Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) requirements. Requirement for "Obliged Entities" apart from financial institutions shall apply to Virtual currency exchange and custodian wallet operators in Lithuania.

Oversight for these activities of crypto companies falls under the Financial Crime Investigation Service (FCIS) or FNTT (Finansinių nusikaltimų tyrimo tarnyba). Each virtual assets service provider shall appoint a senior manager – AML specialists, who will be in the communication with the supervisor. Such a person must be reported to FNTT within 7 business days of appointment or change.

Benefits of Opting for a Lithuanian Crypto License

Choosing crypto license Lithuania presents numerous advantages for businesses aiming to enter the crypto market. Here are some key benefits:

Licensing Capabilities in Lithuania for VASPs

Lithuania offers a broad spectrum of crypto licensing (authorization) capabilities for Virtual Asset Service Providers (VASPs), encompassing various crypto-related activities. Thus, crypto license in Lithuania covers the following:

Particular attention should be given to ICO (Initial Coin Offerings) projects. It is important to specify that they may fall under different regulatory frameworks in Lithuania, contingent upon their legal classification.

Utility tokens often align with the authorization regime applicable to crypto exchanges and crypto wallet service providers, and are covered by so called “Lithuanian crypto license” discussed above. Specific Anti-Money Laundering (AML) rules established in Article 25-1 of The Law on the Prevention of Money Laundering and Terrorist Financing No. VIII-275 are pertinent to them.

However, certain ICO projects might also come under crowdfunding or securities laws in Lithuania. Additionally, crypto assets categorized as financial instruments could be subject to diverse regulations.

As a result, VASPs that have completed the authorization process (Lithuanian crypto exchange license or crypto wallet operator license) might not offer certain services, such as investments in derivative financial instruments related to crypto-assets (e.g., futures and options), contracts for difference (CFDs), or crypto-assets linked to securities. Activities with these instruments might require licensing from the Bank of Lithuania.

Hence, meticulous legal analysis is crucial before initiating crypto activities in Lithuania, ensuring compliance with the multifaceted regulatory landscape.

InteliumLaw's Crypto License Services in Lithuania

At InteliumLaw, we offer comprehensive services tailored to expedite your crypto venture in Lithuania. Our array of services includes:

Company Setup: We guide you through the seamless establishment of your company, ensuring compliance with all necessary legal requirements in Lithuania.

Legal Advisory Services: Our team provides expert legal advice specifically crafted for your crypto project, offering insights and solutions to navigate the complex regulatory landscape. Our team performs Lithuania crypto license search and monitoring of regulatory area to keep you updated on any upcoming changes.

AML / KYC/ KYT Policies Drafting: We assist in drafting robust Anti-Money Laundering (AML) and Know Your Customer (KYC) and Know Your Transactions (KYT) policies, ensuring regulatory compliance and ongoing advisory services to keep your project aligned with evolving requirements.

Tax Advisory Services: Our professionals offer strategic tax advisory services, ensuring efficient structuring of transactions and operations to optimize your tax position.

Transactions Structuring: We provide guidance and support in structuring transactions, aiming for maximum efficiency and compliance with legal and regulatory frameworks.

Preparation for Authorization: We assist in preparing your project for authorization (crypto licensing process) related to crypto activities, ensuring all prerequisites are met for a smooth authorization process.

AML Specialist Assistance: We can help you find and integrate an AML specialist into your team to ensure continuous compliance with AML regulations for crypto license in Lithuania.

Annual Maintenance: Our support extends beyond setup, providing ongoing maintenance services to ensure your continued adherence to regulatory standards.

Partner with InteliumLaw to navigate the legal intricacies and facilitate the successful establishment and operation of your crypto venture in Lithuania.

Crypto License Cost in Lithuania

When estimating the costs associated with obtaining a crypto license in Lithuania, several factors should be taken into account to ensure a comprehensive understanding of the financial requirements. Key considerations include:

At InteliumLaw, we understand that each crypto venture's cost structure can vary based on multiple factors. For a tailored breakdown and precise estimation of the costs involved in obtaining a crypto license in Lithuania, we recommend reaching out to our expert team. Contact us to discuss your project's specifics, and our dedicated professionals will guide you through the cost estimation process, ensuring transparency and clarity at every stage.

Requirements for Obtaining a Crypto License in Lithuania

Several of key Lithuanian crypto license requirements are outlined below:

Notification of Regulatory Authorities: Virtual currency exchange operators and depository virtual currency wallet operators must promptly inform the Register of Legal Entities in Lithuania about the commencement or cessation of their activities within 5 working days. This notification should be accompanied with a confirmation of compliance with anti-money laundering and terrorist financing regulations.

Key Personnel: Entities engaged in virtual currency operations must have a senior employee (AML specialist) who is a tax resident of Lithuania.

Financial Obligations: Legal entities in Lithuania, aiming to operate as virtual currency exchange operators or depository virtual currency wallet operators, must have registered authorized capital of at least 125,000 euros.

Anti-Money Laundering Measures: Designated managerial staff responsible for implementing anti-money laundering and counter-terrorism measures should cooperate with the Financial Crime Investigation Service (FNTT) and notify FNTT within seven working days of their appointment or replacement. They cannot represent multiple entities simultaneously, except within the same group of companies.

Operational Market: Entities with a crypto license in Lithuania should have a due regard to a local market and organize some essential activity in Lithuania

Character and Legal Background of Representatives: Individuals in supervisory roles or beneficiaries within these entities should not have a criminal record involving serious or very serious crimes in Lithuania or abroad within specified periods, ensuring a clean legal background.

For more detailed information regarding the specific requirements and procedures for obtaining a crypto license in Lithuania, it's advisable to consult experienced legal professionals. Contact our team at InteliumLaw for comprehensive guidance tailored to your business needs and regulatory compliance in Lithuanian crypto license.

Lithuania Crypto License Application Process

The below structured process outlines the step-by-step progression from initial discussions and company registration through compliance adherence, officer recruitment, and operational support for acquiring a crypto license in Lithuania.

Preliminary Stage

Company Registration

Regulatory notification

Lithuanian Crypto Licensing (authorization) process

Ongoing Compliance and Operations

Monthly Monitoring: Regularly monitor AML officers' activities, ensuring compliance and assisting in communication with regulatory bodies.

Taxation of Crypto Companies and Transactions in Lithuania

Corporate income tax (CIT) is levied at a standard rate of 15% for income generated from cryptocurrency activities.

However, entities with specific criteria – fewer than ten employees and annual revenues below EUR 300,000 – may benefit from preferential CIT rates. During the first operational year, a reduced rate of 0% applies, followed by a subsequent rate of 5% for ensuing periods, provided certain conditions are met.

Moreover, it's important to note that exchange activities involving cryptocurrency are not subjected to Value-Added Tax (VAT) in Lithuania.

For a more in-depth understanding of the tax landscape and its nuances concerning crypto companies and transactions in Lithuania, consulting our specialists at InteliumLaw is recommended.

Legal and Regulatory Compliance

Operators in Lithuania's virtual currency sphere are mandated to adhere to stringent legal protocols, necessitating the establishment of robust internal policies and control procedures. These encompass various vital aspects:

Starting January 1, 2023, stringent identity verification protocols become mandatory for virtual currency exchange operations or transactions exceeding 700 EUR, including deposits or withdrawals from virtual currency depository wallets.

Additionally, virtual currency operators initiating transactions above 15,000 EUR or equivalent amounts in foreign or virtual currency must provide comprehensive identification data for both natural persons and legal entities involved in the transactions.

Furthermore, effective from January 1, 2025, stringent data transmission mandates will be in effect for companies under crypto license Lithuania regime.

Regulatory Oversight by FCIS

The Financial Crime Investigation Service (FCIS) of Lithuania maintains a vigilant stance on the oversight of virtual currency operators acting under Lithuanian crypto exchange license and crypto wallet services providers license to uphold stringent compliance with the Law on the Prevention of Money Laundering and Terrorist Financing. Enforcement measures, including fines and warnings, could be administered to companies found to be non-compliant during inspections.

The regulator underscores the necessity for stringent measures, citing instances where entities in this sector exhibited laxity in implementing money laundering prevention protocols.

Key reporting requirements to the Financial Crime Investigation Service (FCIS) mandate immediate notification under specific circumstances. These include suspected or attempted suspicious transactions by clients and transactions involving proceeds from criminal activities or intended support for terrorism. Such notifications must be made within stipulated timelines.

Compliance with these reporting and identification requisites is pivotal for virtual currency operators (so called “crypto license holders” in Lithuania) to maintain alignment with Lithuania's regulatory framework and ensure robust prevention of illicit financial activities.

Additional Services

In addition to facilitating the establishment and compliance of your virtual currency operations in Lithuania assistance with crypto license in Lithuania, our services extend to encompass essential supplementary provisions:

FAQ

What is a crypto license, and why is it required in Lithuania?

A crypto license in Lithuania represents an authorization process required for virtual asset service providers (VASPs) to legally operate and offer crypto-related services.

It's mandatory to ensure compliance with the country's regulatory framework, facilitating oversight and adherence to anti-money laundering (AML) and counter-terrorist financing (CTF) measures.

This license signifies that VASPs have met the necessary criteria set by the authorities, promoting trust and legitimacy within the crypto industry while upholding regulatory standards.

What documents needed to obtain a crypto license in Lithuania?

To obtain a crypto license in Lithuania, several crucial documents and details are required:

  • Identification Documents: Passport copies of individuals involved, including the owner, board members, final beneficiaries (UBOs), and the AML officer.
  • Proof of Address: Address verification documents for all involved parties.
  • Criminal Record Checks: Recent criminal record checks (not older than 3 months) for the owner, board members, UBOs, and the AML officer.
  • Power of Attorney: If incorporating remotely, a power of attorney for company incorporation.
  • Business Model Description: Detailed description of the company's business model and specific activities related to cryptocurrency services.
  • Participant CVs: Curriculum vitae (CVs) of all participants involved in the crypto project.
  • Website Details: Information regarding the website intended to offer cryptocurrency services.

How can I benefit from obtaining a crypto license in Lithuania for my business?

Obtaining a crypto license in Lithuania ensures legal operation within the EU and offers a competitive edge in the global crypto market.

What are the key activities allowed under a Lithuanian crypto license?

Under a Lithuanian crypto license, activities such as cryptocurrency exchanges, crypto wallet services, and facilitating crypto transfers are permitted. Additionally, some ICOs align with specific authorization regimes applicable to crypto businesses.

Is it mandatory to have a banking account to obtain a crypto license?

Yes, a bank account will be needed for Lithuanian crypto license company for the purpose of making a share capital contribution

What are the capital requirements for opening a cryptocurrency company in Lithuania?

If establishing a crypto exchange or wallet services provider in Lithuania, the minimum authorized capital is €125,000 for a Lithuanian entity.

How long does it take to secure a Lithuanian crypto license?

The duration to obtain a Lithuanian crypto license typically ranges from 3 to 6 months, encompassing the application process, document preparation, and regulatory review. However, this timeframe can vary based on specific case complexities and regulatory factors.

Are there any restrictions on non-resident directors for crypto companies in Lithuania?

In Lithuania, non-resident directors are allowed to serve in crypto companies.

What advantages does Lithuania offer as a jurisdiction for cryptocurrency-related activities?

Lithuania presents several advantages for cryptocurrency activities:

  • EU and Global Access: Provides access to the EU market and international clientele.
  • Favorable Regulation: Flexible regulations conducive to crypto businesses.
  • Efficient Process: Streamlined procedures for licensing within 5-6 weeks.
  • Clear Requirements: Well-defined and transparent regulatory expectations.
  • Tax Benefits: Comparatively attractive tax rates with potential reductions for new entities.
  • Remote Operations: Allows for operations without a physical office.
  • Fintech Hub: Being part of a growing fintech center in the region.

These elements contribute to Lithuania's appeal as a jurisdiction for cryptocurrency ventures.

What is the validity period of a cryptocurrency license in Lithuania?

The cryptocurrency license in Lithuania has no specified expiration date.

Are there any expected changes in regulation of crypto assets services providers?

MiCA, slated to be enforced on December 30, 2024, will impact Lithuanian crypto license regulations. Authorities are looking to expedite its implementation ahead of the transitional period set until July 1, 2026. This aims to address risks in money laundering, terrorism, and fraud. Once enacted, these changes will subject crypto service providers to regulation and consumer protection requirements, overseen by the Bank of Lithuania and FCIS.

Inteliumlaw closely monitors these shifts for updated compliance.

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