Over the last five years we have seen rapid development of financial and payment services sector in Lithuania, and we can confidently state that Lithuania has become one of the significant centers of fintech industry in Europe and in the world. Today, the development of innovative financial technologies is quite difficult to imagine without the presence of cryptocurrencies and other products closely related to the blockchain system – thus, step by step, Lithuania has become today also one of the hubs for cryptocurrency exchanges and exchanges.
On June 30, 2022, the Seimas of the Republic of Lithuania passed a package of amendments to the Anti-Money Laundering and Counter-Terrorist Financing Law (AML Act). The main purpose of adopting these amendments is to streamline the legal framework governing the sphere of virtual assets and provision, as well as to increase, to some extent, the entry threshold into the virtual asset market for cryptocurrency service providers, which should improve the quality, transparency and reliability of exchange and storage services provided for cryptocurrencies and other virtual assets.
First of all, the above-mentioned amendments adjusted the definition of virtual currency. Thus, according to Lithuanian legislation, the term virtual currency, which includes all cryptocurrencies and most of the various tokens, is defined as follows:
Virtual currency is an instrument that has a digital value but does not have the legal status of currency or money, that is not authorized or guaranteed by a central bank or other government agency and that is not necessarily related to currency but that is recognized by individuals or entities as a medium of exchange and that can be transferred, stored, sold, exchanged, invested and used to settle by electronic means.
New requirements for Lithuanian cryptocurrencies and VASP
The amendments to the AML Act also established additional requirements for cryptocurrency companies that provide crypto-asset exchange and custody services. Below we list the most important circumstances that were outlined in the above-mentioned amendments, which should be paid special attention to:
Statutory capital for a crypto company in Lithuania
A legal entity established in the Republic of Lithuania, which intends to operate a virtual currency exchange operator and/or a virtual currency depository wallet operator, must have a registered share capital, which must be at least EUR 125,000.
Local AML officer / MLRO for VASP in Lithuania
A legal entity that has started operating as a virtual currency exchange operator and/or virtual currency deposit wallet operator must have a senior manager who is a permanent resident of Lithuania.
Providing services in the Lithuanian market
A virtual currency exchanger and/or virtual currency depository wallet operator must not provide its services exclusively to customers from another country or focus on providing services in another country’s market to the extent that its activities in the Republic of Lithuania could be considered formal and immaterial based on the company’s business model.
How to bring a company into compliance with the new requirements of the FNTT regulator?
Those cryptocurrency companies that have obtained a cryptocurrency license in Lithuania and registered the activity of a virtual currency exchange operator and/or virtual currency depository wallet operator before November 1, 2022 must bring their activities into compliance with the new requirements no later than December 31, 2022 and are entitled to continue their activities within the designated transitional period without any restrictions.
Statutory Capital Registration
Cryptocurrency companies operating in the jurisdiction of the Republic of Lithuania are required to form a share capital of at least EUR 125,000 by depositing money into the company’s current account, after which changes in the share capital must be registered with the Lithuanian Commercial Register and shown on the company’s register card.
The Lithuanian Commercial Code allows for contributions to the share capital of a legal entity so that 25% of the declared amount is paid at the initial stage and the remaining 75% must be paid within one calendar year.
Attracting a local MLRO
All active Lithuanian cryptocurrency exchanges must recruit a local AML officer / MLRO into their staff no later than December 31, 2022, conclude an employment contract with him/her and notify the FNTT regulator of the local AML officer’s assignment to the cryptocurrency company. Our team is ready to provide you with HR services and help with recruiting a qualified MLRO from among residents of the Republic of Lithuania, as well as offer further support on the issue of formalizing the employment relationship and their registration with the tax authority and SODRA and notifying the FNTT regulator of the appointment of an AML officer.
What happens if I ignore the new FNTT requirements?
If a crypto-enterprise for any reason ignores the obligation to comply with the new requirements of the AML Act and the FNTT regulator and fails to bring the company into proper form by December 31, 2022, such crypto-company will be excluded from the list of virtual currency exchange operators and/or virtual currency depository wallet operators and lose the right to provide crypto-oriented services starting from January 1, 2023.
Assistance in adapting the company to the new FNTT requirements
Our experts are ready to fully assist you in adapting your crypto project and bringing your cryptocurrency company in line with the new requirements of the FNTT regulator. We will help you with making and registering share capital, offer individual HR services in finding and hiring a qualified MLRO, and accompany you in resolving other nuances and circumstances that need to be resolved as the company adapts to the new requirements of the AML Act of the Republic of Lithuania.
Is Lithuania still an attractive jurisdiction for crypto projects?
Yes, Lithuania certainly remains one of the most relevant and efficient jurisdictions for crypto-oriented activities and crypto-asset exchange and storage services and is likely to remain so for a long time to come.
This is due to the fact that the regulation of virtual assets and cryptocurrency exchange and storage services in Lithuania remains one of the simplest, most straightforward and liberal compared to other jurisdictions in Europe. The AML Act of the Republic of Lithuania does not provide for any additional AML/KYC obligations for cryptocurrency market participants, unnecessarily aggravating and bureaucratic internal processes of a cryptocurrency company, therefore the state policy towards crypto-assets and AML/CFT legislation of Lithuania and FNTT regulator practice can be considered as a reference for other European states.
Also, the previously outlined changes regarding increasing the authorized capital (at the initial stage, a contribution of 25% of the required amount of EUR 125,000) and involvement of a local MLRO (Lithuania has a sufficient number of qualified AML specialists) are not excessive and burdensome, because they can be implemented without much difficulty by the average participants of the Lithuanian cryptocurrency services market.
If you are interested in registering a crypto company in Lithuania and obtaining a VASP license, or if you would like more information about the innovations in the Lithuanian AML legislation – please contact our consultants by phone, e-mail or using the feedback form on our website.