Since 2020, Lithuania has emerged as one of the most crypto-friendly countries in the European landscape, thanks to its liberal business environment and forward-thinking legislation. This status has been achieved through a high degree of openness to innovation and entrepreneurship, coupled with progressive laws that foster the growth of the cryptocurrency industry. Acquiring a crypto license in Lithuania is a fundamental requirement for launching operations related to cryptocurrency exchange services and digital wallets.

Operations in this sector are rigorously regulated to prevent monetary crimes. The licensing framework is designed to guarantee the safety and reliability of cryptocurrency companies' operations, safeguarding the interests of investors and users. This material outlines the key requirements for obtaining a crypto exchange license in Lithuania.

Crypto regulation in Lithuania: current changes

In 2022 and 2023, Lithuania underwent substantial transformations in its regulatory framework governing cryptocurrency activities. These changes encompassed both legal and regulatory dimensions, impacting the cryptocurrency industry within the country. The newly introduced measures aimed to enhance oversight and user protection, prevent fraud, and ensure adherence to international standards.

One of the pivotal changes was the introduction of new licensing requirements for registering cryptocurrency companies in Lithuania. These mandates encompass rigorous compliance checks and financial transparency obligations. Moreover, AML measures in the cryptocurrency sector were significantly tightened. Companies are now required to adhere to stringent customer verification and reporting standards, conduct transaction monitoring to identify suspicious activity, and the use of fully anonymous accounts has been prohibited.

As of January 1, 2023, regulatory amendments in Lithuania have tightened requirements for cryptocurrency exchange operators, mandating an increase in minimum share capital to 125,000 EUR.

Furthermore, new regulations pertaining to cryptocurrency companies have been put into place, including the designation of a senior executive who will be responsible for AML conformance and who must be a citizen of the country. Additionally, more criteria and thresholds are now required of organizations that undertake initial coin offerings (ICO).

Within the legal framework, an ICO in Lithuania is characterized as the initial issuance process whereby a legal entity incorporated in Lithuania, or a branch set up in Lithuania by a legal entity from the EU or another nation, offers its digital currency for purchase for the first time, either directly or through an intermediary. This offering is conducted to raise capital or attract investment through the exchange of funds or other forms of digital currencies.

A clause in the proposed amendments states that the Registrų Centras would make a list of businesses that operate as cryptocurrency exchange operators and suppliers of digital currency custodial wallets available to the public beginning on February 1, 2023. By doing this, the market for bitcoin services will become much more transparent, giving investors and consumers a better knowledge of the services available and who is offering them. These actions support the market's safe functioning and aid in the fight against illegal activity.

Thanks to a series of legislative amendments initiated by the government, Lithuania now ranks among the top European nations for fintech businesses. Vilnius, the capital of the Republic of Lithuania, is recognized as one of Europe’s premier fintech hubs. Vilnius garners global attention as a nexus where innovation intersects with financial opportunities in a business-friendly environment.

Lithuanian authorities are gearing up for the enactment of the MiCA Regulation by year-end 2024. This regulation offers a grace period extending to July 1, 2026, for cryptocurrency service providers to adjust to the new stipulations. However, owing to substantial hazards associated with AML activities, circumvention of international sanctions, and fraudulent conduct within the cryptocurrency industry, a proposal has been tabled to waive the grace period and enforce adherence to the MiCA Regulation in the Republic from its inception.

Which body is appointed responsible for regulating cryptocurrency activities in Lithuania?

The Financial Crimes Investigation Service (FCIS) is endowed with regulatory authority in the field of cryptocurrencies. The main legislative acts:

The FCIS conducts analysis and processing of applications for issuing licenses for cryptocurrency activities in Lithuania, undertaking meticulous scrutiny of applicants' adherence to established standards. It monitors the activities of licensees to ensure compliance with legislation in the field of cryptocurrency operations. If illicit activities or violations in the realm of cryptocurrencies are detected, the FCIS promptly implements measures to halt such operations.

The concept of a "crypto license" in the context of Lithuania may be employed conditionally, as the provision of services in the realm of virtual currencies entails the issuance of a specialized authorization rather than a conventional license. This authorization serves as a specialized instrument furnished by the country's regulatory bodies to companies desiring to engage in cryptocurrency operations within its jurisdiction. Thus, while the term "crypto-license" may conveniently denote this process, formally, it constitutes an authorization tailored to the peculiarities of the cryptocurrency market and its regulation in Lithuania.

It is noteworthy that the Central Bank of Lithuania insists on the necessity of a strict delineation of functions between traditional financial institutions and companies operating in the cryptocurrency industry. This proposal aims to ensure clear regulation and protection of the interests of all participants in financial markets. However, despite the established distinctions, virtual assets may be incorporated into the activities of traditional market participants in accordance with specific rules and standards. This opens up opportunities for potential participation of traditional players in the cryptocurrency market and promotes the development of innovative approaches in the field of financial services.

Crypto license in Lithuania

Companies have two types of cryptocurrency permits available to them, and they can choose one of them or obtain both types of permits at the same time.

  • License for a crypto exchange in Lithuania.

A holder of a digital currency exchange license, be it a separate entity or a subsidiary of a larger organization, is authorized to facilitate the trading of digital currencies and levy charges for the services provided. This authorization encompasses a comprehensive suite of activities, including the conversion of fiat currency to cryptocurrency, the conversion of cryptocurrency to fiat currency, and the exchange of one cryptocurrency for another.

  • License for operating a cryptocurrency wallet repository in Lithuania.

This permit is obligatory for firms offering cryptocurrency wallet services that produce and protect encoded keys for their customers, which can be utilized for both custody of cryptocurrencies and transactions involving virtual assets. Criteria for approval for this license type:

  • Availability of sufficient reserve capital to cover potential financial risks and liabilities.
  • Implementation of comprehensive cybersecurity measures to protect data and IT infrastructure from threats and attacks.
  • Ensuring a high degree of reliability and availability of your IT systems and equipment.

Entities, whether they are parent companies or their affiliates, regardless of their residency status in the EU, have the right to apply for acquiring a cryptocurrency permit in Lithuania. Usually, the whole procedure lasts between 6 to 8 weeks.

How to get a crypto license in Lithuania?

Upon successful completion of the business registration procedure in the Republic of Lithuania and acquisition of the requisite certificate, it becomes imperative to submit an application for a cryptocurrency license in Lithuania. Under these circumstances, establishing a private limited liability company is indispensable.

Forming a limited liability enterprise in Lithuania for crypto-related operations not only provides legal safeguards and constrains financial liability but also grants entry to an extensive array of banking and financial amenities.

Requirements for enrolling a corporation for cryptocurrency operations in Lithuania:

  1. One shareholder required, can be individual or corporate.
  2. Minimum one board member, no residency restrictions.
  3. Local AML officer needed, may double as board member.
  4. €125,000 authorized capital minimum.
  5. Local office or virtual office required.
  6. Disclosure of beneficial owners necessary for transparency.

The creation of corporate documentation and the gathering of papers from those interested in the cryptocurrency business—whether they be shareholders, directors, ultimate beneficiaries, or board members—must be handled carefully. This idea highlights how crucial it is to guarantee the legal integrity and transparency of every individual involved in the business process.

List of documents required from

individuals

legal entities
  • Passport copies verified by a notary.
  • Evidence of existing residence, such as utility invoices or bank documents from within the last three months.
  • Authorization of Attorney, essential for the distant enrollment and licensing of a business.
  • A curriculum vitae or another record verifying the credentials and professional background of each member involved in the project.
  • A certificate confirming the absence of any criminal record, dated within the last three months, must be provided for every individual involved in the project.
  • Charter alongside additional business papers.
  • A pact endorsed by every board member of a corporation, detailing explicitly their obligations, authorities, and accountabilities.
  • Evidence of initiating a bank account in Lithuania, an indispensable component of orchestrating the financial operations of the company.
  • An exhaustive portrayal of the enterprise's operations, encompassing the operational strategy and strategic blueprint.

Procedure for registering a cryptocurrency company in Lithuania

The establishment of a crypto business in Lithuania may present an alternative to launching a venture in other European states, being perceived as a comparatively accessible and cost-effective solution. This option may be pertinent for those who had intended to undergo crypto licensing in Estonia but, owing to legislative amendments in that country, are exploring alternative prospective platforms.

Several years ago, the Estonian government introduced amendments to legislative acts, tightening the requirements for obtaining a license for activities related to cryptocurrencies. These changes include increasing the demands for substance presence, enhancing AML/CTF rules, and significantly raising the minimum capital required for issuers. As a result of these measures, many entrepreneurs wishing to commence bitcoin-related businesses in Europe prefer to register their enterprises for crypto activities in Lithuania.

To register a crypto business in Lithuania, you will need to follow certain steps:

  1. Formulating a business framework is crucial at this juncture. This phase involves outlining the business approach, outlining the fundamental functions and goals of the enterprise within the realm of tokenized currency. It's essential to conduct a thorough evaluation of the market and competitors to identify distinctive strengths and the specific industry segment the company aims to serve.
  2. Selecting an exclusive title. These are crucial measures for formalizing the legal standing of a corporation. The title must not only be distinctive but also embody the core of the company's operations.
  3. It's crucial to collect the required paperwork and deliver it to the appropriate regulatory body. As mandated by state legislation, anyone representing the company should furnish the requisite documentation, encompassing evidence of identity and financial stability.
  4. At this phase, the formal enrollment of the entity occurs, encompassing all essential founding paperwork and forms.
  5. After receiving the Certificate of Registration, a request is made for a cryptocurrency company to open an account with a Lithuanian bank, where a transfer of the initial capital is necessary. It will be necessary to create two separate accounts, B2B and C2B, in order to assure that cryptocurrency-related operations go smoothly.
  6. Application submission to the FCIS for seeking authorization for conducting cryptocurrency activities in Lithuania.

Crypto permit in Lithuania: customer verification procedures

Stringent criteria have been instituted to thwart financial manipulations for firms possessing permits for crypto trading in Lithuania. Primarily, this entails developing and implementing comprehensive internal supervision policies that all employees are required to adhere to. These procedures are made to assess and manage the risks associated with using cryptocurrencies in accordance with the legal requirements set out by authorities.

An essential aspect involves assessing the operational risks of the company based on stringent criteria established by regulators. This will enable the identification of potential threats and the formulation of corresponding measures for their mitigation. Furthermore, following the launch of a crypto startup in Lithuania, ensuring external monitoring by competent authorities is imperative. This entails collaboration with law enforcement agencies and financial regulators for the exchange of information regarding suspicious activities and the implementation of joint measures to curb them.

Client and recipient identification requirements include:

  1. Assessing client autonomy.
  2. Identifying customer representation by agents.
  3. Client identification.
  4. Identification of the client's legal entity.
  5. Managerial client info.
  6. Compilation of information regarding the configuration of ownership and control within the client's legal establishment.
  7. Compilation of information regarding the objectives and envisioned character of the client's business engagement.
  8. Confirming the identity of the client and the receiver through documentation or information acquired from a dependable and autonomous origin.
  9. Continuous observation of the client's commercial connections.
  10. Routine review and updating of documentation, including data supplied for recipient and customer validation.
  11. Implementing identification protocols for both fresh as well as current clientele.
  12. Halting a dubious financial transaction or activity.
  13. Notification of potentially fraudulent financial activities or transactions, including those with a value of at least 15,000 euros or the corresponding amount in foreign or digital currency.
  14. Storing data for a specified duration.
  15. Choosing individuals responsible for implementing AML/CFT protocols.
  16. Deployment of in-house mechanisms facilitating prompt reaction to FCIS inquiries through secure communication channels, etc.

If you intend to register a crypto exchanger in Lithuania, please note that verification and verification are required:

  • Prior to initiating a business arrangement;
  • Before engaging in indiscriminate transactions with digital currencies or spontaneous transactions involving digital currencies surpassing the sum of 1,000 euros or its corresponding value in foreign or virtual currencies;
  • In instances where uncertainty arises regarding the correctness or genuineness of previously provided information regarding clients and beneficiaries;
  • In any alternate situation wherein there are signs of possible financial washing.

Starting in 2025, Virtual Asset Service Providers (VASPs) will be required to adhere to the Transfer Rule. This mandate entails the acquisition, preservation, and conveyance of specified transaction and client information to both recipient VASPs and receiving financial establishments. Any failure of a VASP to provide the necessary data will lead to the refusal of transactions involving that entity by other VASPs. Neglecting to comply with these requirements will result in punitive measures and legal consequences.

Crypto licensing in Lithuania: appointment of MRLO

According to the AML Law, VASP must appoint a responsible party to oversee adherence to AML regulations. This senior staff person will work with regulators to coordinate and carry out the necessary AML/CTF procedures as required by law.

In Lithuania, should a crypto firm delegate management to a board of directors, it bears the duty of selecting a board member to supervise anti-money laundering initiatives. Moreover, regulations require the firm to provide written notice to the FCIS within seven working days following the appointment or replacement of such staff and members of the management board.

The person designated for the MRLO role should have the necessary credentials, significant expertise, and competencies essential for executing a risk-focused strategy within the organization. Particular emphasis is placed on the individual's standing, as its integrity impacts the degree of confidence in the company.

With the enactment of fresh laws, subsequent to the enrollment of a cryptocurrency enterprise in Lithuania, the designated MRLO must establish residency for tax purposes within this nation on a continual basis. Furthermore, strict limitations are imposed on the possibility of appointing one individual to positions in multiple cryptocurrency companies, aimed at ensuring effective control and preventing potential conflicts of interest.

A company's anti-money laundering specialist is responsible for a number of key tasks, including:

  • Establishing and enforcing protocols and guidelines to deter illicit financial activities.
  • Surveillance and evaluation of monetary dealings to pinpoint potential instances of financial crime.
  • Cooperating with both internal and external auditors to authenticate the company's adherence to anti-money laundering (AML) standards.
  • Educating staff members on techniques and indicators of financial misconduct.
  • Engaging with regulatory bodies and law enforcement authorities upon identifying questionable transactions.
  • Supporting executive management in devising strategies for complying with anti-money laundering regulations.

Lithuania's taxation of bitcoin businesses

In Lithuania, company profits incur a general tax rate of 15%. Nonetheless, for micro-enterprises with a staff count not exceeding 10 and annual revenue below 300,000 euros, preferential rates ranging from 0% to 5% are applicable. Transactions involving virtual currencies for the exchange of goods and services adhere to standard VAT regulations, akin to those for euro transactions. However, dealings in bitcoin attract a 15% income tax. VAT reimbursements must be processed in euros.

Forms of raising capital in Lithuania

In 2019, the Central Bank updated its digital asset strategy and token issuance, laying forth new regulatory ideas. Based on the ICO type , it may fall within the regulatory supervisory scope or be subject to responsibilities pertaining to securities offers, crowdsourcing projects, pooled investments, or investment offering facilitation. The Bank of Lithuania has released its rules for security token offers, which provide a detailed view of the legal requirements specific to the features of the tokens in question.

Conclusion

Lithuania offers easy crypto licensing, remote application, no foreign ownership restrictions, and a low 15% tax rate, making it a top choice for fintech ventures. Need help setting up? Contact TK Deal experts for specialized support.