The cryptocurrency market has experienced significant expansion over the past decade and has become an important part of the global financial system. In this changing environment, the regulatory framework is crucial for the operation and long-term sustainability of crypto businesses. Recently, Lithuania has attracted the attention of financial entrepreneurs due to its forward-looking approach in fintech and digital innovation, which can be seen from the significant increase in the number of such companies in the country.
The European Commission and the European Parliament recognized the growing popularity of crypto assets and officially classified them as financial instruments. In addition to this favorable development, companies involved in crypto assets will also have to comply with the new licensing rules set out in the Regulation on Crypto Assets in the EU Market (Regulation (EU) 2023/1114), also known as the MiCA Regulation. Still,It is believed that these changes are beneficial for the cryptocurrency system as a whole. As part of the MiCA implementation plan, Lithuania has recently made major legislative amendments to strengthen the regulation of cryptocurrency businesses. These developments underscore the country's commitment to creating a safe and compliant environment for crypto businesses and make it an ideal place for businesses seeking a strong regulatory structure and opportunities for expansion. Lithuania has been identified as the second largest destination for fintech start-ups in Europe and the fourth largest globally, demonstrating its attractiveness to emerging players in the digital finance industry.
Changes in Lithuanian legislation
In line with the EU's broader regulatory objectives, Lithuania will incorporate MiCA into its domestic framework. In 2023, the EU implemented the MiCA to establish consistent regulations for crypto asset business between member states. In contrast to other EU countries, Lithuania chose not to take advantage of the transition period provided by MiCA, requiring full compliance by 30 December 2024. Cryptocurrency service providers in Lithuania will be required to hold a crypto asset service provider license by June 2025, a faster timeline that provides more time for existing and potential participants to prepare for the licensing process.
Important regulatory changes involve stringent requirements for Know Your Customer (KYC) and Anti-Money Laundering (AML). Businesses need to establish strong verification procedures to verify the authenticity of their customers and transactions. In addition, the scope of activities under the regulation has been expanded to cover more services such as crypto asset management, trading platforms and consulting services, in addition to virtual currency exchanges and custodial wallets. Crypto companies in Lithuania must implement thorough compliance strategies to successfully cope with the update of the regulatory environment brought about by these changes.
In addition, the latest provisions of the Law on the Prevention of Financing of Terrorism implement new rules, such as the requirement that cryptocurrency service providers in Lithuanian financial institutions must maintain a minimum capital amount of € 125,000. This condition provides more predictability and security to the emerging crypto industry, ensuring that only financially sound entities participate in the market. This condition reflects the amount of capital that MiCA will require, which may sometimes require additional investment by the Company.
By the end of 2024, the implementation of miCA will bring new capital amount classification and structure.
Class 1 service category, with a capital amount of € 50,000, allows the following operations:
receiving and delivering orders on behalf of third parties; and/or
provide cryptographic asset advisory services; and/or
execute orders on behalf of third parties; and/or
Issuance of crypto assets.
Class 2 service category, with a capital amount of 125,000 euros, allows the following operations:
Level 3 service category, with a capital amount of EUR 150,000, allows the following operations:
exchange of crypto assets into legal tender;
exchange of crypto assets for other crypto assets;
Operate a crypto asset trading platform.
Advantages of Lithuanian Jurisdiction
Lithuania is known as an ideal location for a cryptocurrency company due to its clear regulation, economic benefits and supportive environment. One of the main advantages is the simplified licensing process. Lithuanian officials, mainly the Bank of Lithuania, have demonstrated effectiveness and cooperation in communicating with stakeholders on the implementation of MiCA regulations, ensuring that businesses have a say in shaping the future of Lithuania's crypto industry.
In addition, Lithuania offers attractive tax incentives for fintech and crypto companies. The corporate tax rate has advantages and there are special incentives for companies involved in innovation and digital projects. Compared to popular jurisdictions such as Malta or Poland, Lithuania offers a more economical and manageable regulatory environment while still maintaining high compliance standards.
The country also has a well-trained workforce and a strong technological infrastructure, further increasing its attractiveness. A collaborative environment supported by regulators and industry associations allows crypto businesses to thrive in changing market conditions. In addition, Lithuania has recently been recognized as one of the top destinations for fintech startups, highlighting its effectiveness in providing an environment conducive to digital financial innovation.
Benefits of buying a ready-made company
Entrepreneurs seeking to quickly enter the Lithuanian crypto market can gain a strategic advantage by purchasing pre-established companies with valid licenses. This approach significantly reduces the time and complexity of setting up a new entity from scratch and going through the licensing process. By acquiring companies that already hold licenses, companies can skip the lengthy approval process and start operations immediately, ensuring smooth market entry.
In addition, buying a company with an existing license can reduce the risk of compliance with regulatory requirements. By conducting a thorough investigation when purchasing an existing company to ensure that all regulatory requirements are met, peace of mind and stable operations can be provided. This approach provides an actionable framework that enables businesses to scale and enter the market faster.
Our expertise in licensing
Focused on dealing with the complexities of cryptocurrency business in Lithuania. With an office in Lithuania, we offer customized services for setting up cryptocurrency businesses and ensuring MiCA compliance. In addition, we offer the sale of pre-established cryptocurrency businesses that meet all current regulations.
Our lawyers in Lithuania work closely with the Lithuanian Financial Crimes Investigation Agency and the Bank of Lithuania to keep abreast of regulatory requirements and legislative changes. Our close collaboration allows us to provide precise and timely guidance to our clients, ensuring their business is compliant and prepared for success.
The Bank of Lithuania is known for its friendly and welcoming attitude, encouraging cooperation between regulators and businesses. This cooperation guarantees the effective implementation of MiCA, while addressing stakeholder concerns and establishing a fair and supportive regulatory environment.
We are fully involved in the development of crypto regulation in Lithuania. We pay close attention to the legislation and the consultation and communication of government agencies. We have proactively notified our existing customers about these regulations, giving them the confidence and assurance that they will be able to proceed safely.
secret activities.
In addition, Lithuania is recognized as a top choice for fintech start-ups, which highlights our country's commitment in promoting advanced fintech. InWe use this honor to help our clients succeed in a competitive market.
Currently, a draft implementation plan for MiCA in Lithuania is being prepared. Our team played a key role in developing this strategy, ensuring the best advice and assistance for our customers. We emphasize the importance of high-quality documentation and proactive interaction with regulators to streamline the licensing process.
Recommendations for crypto-currency companies
To thrive under Lithuania's regulatory framework, cryptocurrency companies should take proactive compliance measures and strategic planning. Here are 10 key recommendations for our existing customers that we also want to share with you:
Early preparation:Begin the licensing process early before the deadline of December 30, 2024. This includes preparing the necessary documentation, establishing robust KYC and AML protocols, and ensuring that the organizational structure meets regulatory standards. Our companyCan help you prepare all the necessary materials and simplify the process.
Comprehensive Compliance Program:Develop and implement a comprehensive compliance program covering all aspects of MiCA requirements. This includes risk assessments, internal controls and regular audits to ensure ongoing compliance.
Working with experts:Work with regulatory advisors and legal experts, e.g.experts to deal with the complexities of the licensing process and keep abreast of legislative changes.
Investment technology:Leverage advanced compliance and security technologies to improve operational efficiency and prevent regulatory violations.
Continuous monitoring:Establish continuous monitoring and reporting mechanisms to address any compliance issues in a timely manner and to accommodate regulatory updates.
Note Heavy Sentence Mass:Ensure that all submissions are comprehensive, accurate and tailored to your specific business model. Avoid using generic templates, provide details to meet the expectations of the Bank of Lithuania.
Improve management capacity:Make sure your management team has a deep understanding of the legal framework for crypto activities. Provide ongoing training and support to maintain a high standard of regulatory knowledge.
Promote Crotto East Transparency:Maintain a clear and transparent record of shareholder information, including sources of funds and ownership structure, to facilitate the reputation assessment of the Bank of Lithuania.
Strengthening internal controls:Implement robust risk management and internal control systems to prevent money laundering and terrorist financing. Ensure that the responsible personnel are adequately qualified and experienced.
Cooperation with financial institutions:Establish close working relationships with banks and other financial institutions to ensure smooth operations and compliance with regulatory requirements. InWe can guide you through these key partnerships.
The Bank of Lithuania has pointed out common deficiencies in many licensing applications, emphasizing the importance of thorough document preparation and a comprehensive understanding of regulatory requirements. Applicants should avoid using generic template applications and ensure that all information provided is accurate, clear and specific to their business circumstances. The main areas of concern include:
Application Mass:Avoid using template submissions and ensure that all necessary information is provided in advance.
Management Competence:Demonstrate an in-depth understanding of the legal framework for cryptographic activities.
Crotto East Transparency:Provide comprehensive information about shareholders, including funding sources and ownership structure.
Internal Control:Ensure that strong risk management measures are in place to prevent money laundering and terrorist financing.
By complying with these recommendations, cryptocurrency companies can reduce regulatory risks, maintain smooth operations, and take advantage of the supportive regulatory environment in Lithuania. For a personalized consultation with detailed advice on MiCA implementation preparations, please contact us.
Conclusion
Lithuania is committed to creating a strong and transparent regulatory framework for cryptocurrency businesses, opening up unprecedented opportunities for growth and innovation. Recent legislative changes to align with the EU's MiCA regulations have enhanced the operating environment and made Lithuania an attractive jurisdiction for crypto businesses. Buying an off-the-shelf company with an existing license becomes a strategic choice, offering the advantages of immediate market entry, reduced risk and operational stability.
Adopting an expert-driven approach is essential for successfully responding to the changing regulatory environment.We are committed to providing the necessary expertise and support to ensure that your cryptocurrency business not only complies with current regulations, but also thrives in a competitive market. Our in-depth knowledge of Lithuanian regulations, coupled with our proactive interaction with regulators, puts us in a unique position to help your business achieve compliance and operational excellence.
Take the next step and secure your place in Lithuania's growing crypto market. Contact us today to ask how we can help you set up a compliant and successful cryptocurrency business.
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