At present, Lithuania is a recognized traditional financial jurisdiction for licensing payments and electronic money in Europe. Also having the authorization of cryptocurrency exchanges and cryptocurrency wallet operators, Lithuania is one of the few European Union and European Economic Area (EU/EEA) member states offering a license for transactions with virtual currency.
The world’s largest cryptocurrency exchange Binance is authorized in Lithuania as a cryptocurrency and cryptocurrency wallet operator since mid-2020. Binance provides its services to European clients from Lithuania. ECOVIS advised Binance throughout the establishment and authorization process.
Advantages of Getting a Crypto License in Lithuania
The main features and distinguishing features of the implementation of crypto-exchange activities in the territory of Lithuania are the possibilities of official notification and authorization for crypto-exchange activities.
You do not need to make a special crypto license in Lithuania – you can use the one that the company uses for the sale of basic goods and services. The country has long been a center of excellence in fintech, which is focused on developing international financial markets.
Regulatory business-oriented behavior, reduced costs for registration, servicing, and licensing of financial companies make Lithuania the most attractive choice for international-level institutions and start-ups in the fintech niche. Companies only need to pay the cost of registration of the company, enter the authorized capital, and prepare a package of documents for filing.
The requirements for the procedure are simple, plus Lithuania – is not the most bureaucratic country. It is enough to meet the minimum list of conditions, to enter the organization in the appropriate register. There are no strict requirements for the residence of shareholders and directors. High processing speed. The license will be ready within 3 weeks. The amount of corporate tax is 15%, which is the minimum figure in the EU. Possibility of remote registration. There are no strict requirements for hiring local staff, which is also a plus.
Types of Cryptocurrency License and Registration
There are two types of cryptocurrency authorization:
- cryptocurrency exchange operator – a company or branch of another company that exchanges cryptocurrency belonging to clients for a commission.
- cryptocurrency wallet operator – a company or branch of another company that manages wallets for cryptocurrency customers.
The activities of cryptocurrency exchange operators and wallet operators for cryptocurrency storage should be separate from licensed traditional financial activities (payment institutions, electronic money institutions, etc.). However, licensed financial institutions can service fiat payments to cryptocurrency companies and their clients, creating an effective fiat payment mechanism associated with cryptocurrency.
Requirements to prevent the legalization of proceeds of crime and rules for the identification of customers
Registered legal entities (companies) in Lithuania may apply for the registration of crypto activities. The Registrar of Legal Entities of Lithuania must be notified of the activities related to cryptocurrency, as well as of the measures taken to counteract the legalization of proceeds of crime. Cryptocurrency and cryptocurrency wallets are controlled by the Financial Crimes Investigation Unit – FIU. Board members as well as the ultimate beneficial owners (UBO) of the company need to meet the requirements of impeccable reputation.
General requirements for legal entities engaged in activities related to cryptocurrency:
- identification and verification of clients
- reporting to the FIU of Lithuania
- keeping records and client data
- appointment of the Manager responsible for compliance with the requirement to prevent the legalization of proceeds of crime
- Implementation of internal control policies and procedures.
Registration of initial placement of coins
Separate requirements for countering the legalization of proceeds of crime, rules for identification of customers, as well as other reporting requirements are established for companies engaged in the initial placement of coins, attracting financing through the public distribution of virtual coins to investors.
Registered legal entities (companies) in Lithuania have the right to register the initial placement of coins and carry out public distribution of tokens, successfully offering virtual coins to investors in all EU countries.
Regulation of cryptocurrencies in Lithuania: Basic Law
The legislation regarding the Lithuanian cryptocurrency market is very complex, and this is mainly divided into two main categories:
- ICO or tokens that do not offer management rights or profits; and
ICO and tokens that grant the right to profit and control.
Regulation of cryptocurrencies that offer management rights and profits is conducted in accordance with numerous legal acts, depending on the specifics of the cryptocurrency. The following list summarizes some of the legislative provisions:
- ICOs and tokens created with the characteristics of securities are regulated by the Securities Act;
- Crowdfunding tokens that meet the characteristics of crowdfunding are regulated under the Crowdfunding Act;
- ICOs and tokens that may be included in the financial instrument category will be regulated in accordance with the legal framework of the Financial Instrument Markets Act;
- Companies and other entities that raise funds through ICOs are regulated by the Collective Investment Act;
- Crypto regulation in Lithuania is also carried out in accordance with AML/CTF laws.
Licensing process
To apply for a crypto license in Lithuania, the first step is to register the company in Lithuania. You can also obtain registration through a registered branch of a foreign company in Lithuania.
In the case of a foreign corporate shareholder (a Lithuanian licensed company), FCIS requires an apostilled set of corporate documents from the foreign company and each related person, including the UBO of the respective person. Starting a company usually takes 5 working days.
Opening a bank account can take an additional 2-6 weeks. The acquisition of a licensed company could also be considered. For more information on this issue, please contact our specialists. If you want to start a company remotely (without visiting Lithuania), note that this is possible and usually takes 2-3 weeks of additional time and requires additional costs.
After registration of the company and receipt of all the necessary information/documents mentioned above, you can apply for the appropriate permission. The application for a license for cryptocurrency will be processed by the Bank of Lithuania and FCIS within 20 working days from the date of application.
Taxation of cryptocurrency transactions in Lithuania
According to the Lithuanian regulation of cryptocurrencies, investors need to pay corporate taxes, tariffed at a standard rate of 15%. Investors must also pay a 15% source tax on dividends from crypto investments.
Conclusion
The development of a regulatory and supervisory system favorable to FinTech, as well as the promotion of innovations in the financial sector, is one of the main strategic directions of the Bank of Lithuania today. Together with other government departments, the Bank aims to create an enabling environment for the registration of crypto companies, which will contribute to the development of the crypto industry in the country.
