Cryptocurrency Exchange and Crypto Currency Wallet Operator Authorization
Lithuania is one of few European Union and European Economic Area (EU/EEA) member states currently having Virtual Asset Service Provider (VASP) authorization. Being widely recognized traditional finance jurisdiction for payment and electronic money licensing in Europe Lithuania also offers transparent and cost effective virtual currency authorization. Worlds biggest crypto exchange Binance holds Lithuanian crypto exchange and cryptocurrency depository wallet authorization from the middle of 2020. ECOVIS advised Binance during whole incorporation and authorization process. European Markets in Crypto-Assets Regulation MiCA introducing harmonized crypto assets regulatory framework in all Europe currently is under development. Lithuanian national virtual assets regulation currently considered as most favorable in European Union allows provision of crypto assets related services in single European market.
Types of Virtual Asset Service Provider VASP registration:
Crypto currency exchange operator is the company or the affiliate of another company exchanging cryptocurrency owned by the client for the commission fee
Crypto currency depository wallet operator is the company or the affiliate of another company managing client cryptocurrency depository wallets
Authorization also allows issuing of virtual assets (tokens) in primary market.
Activities of the cryptocurrency exchange and cryptocurrency depository wallet operators needto be separated from the licensed traditional finance activity (payment or electronic money institution, etc.). Nevertheless, licensed financial institutions allowed to serve the fiat payments of the crypto registered companies and their clients creating effective vehicle for crypto-fiat payments.
Coin and Exchange Offering ICO/IEO registration
Virtual Coin and Exchange Offering (ICO/IEO) and token distribution for the investors require a separate authorization. Separate AML/KYC and other reporting requirements are established for the companies carrying out ICO/IEO activities and attracting financing through the public distribution of tokens and virtual coins to the investors. Lithuanian registered legal entities as well as Lithuanian registered affiliates of EU and non-EU companies allowed to register and publicly distribute virtual coins offering them to the investors in EU/EEA area.
Main AML/KYC requirements for companies holding VASP authorization
Lithuanian registered legal entities and affiliates of EU and non-EU companies can apply for Virtual Asset Service Provider authorization. Applicants need to have all necessary AML/KYC policies and implemented procedures necessary for the provision of virtual assets related activities. Cryptocurrency exchange and cryptocurrency depository wallet operators are supervised by Lithuanian Financial Crime Investigation Unit – FIU. Members of the Management Board as well as Ultimate Beneficial Owners (UBO’s) of the company need to meet the requirements of impeccable reputation. There is no requirement forth the directors and members of the board to be Lithuanian/European residents.
Members of the Management Board as well as Ultimate Beneficial Owners (UBO’s) of the company need to meet the requirements of impeccable reputation.
General requirements for the entities engaged in cryptocurrency activities:
Customer identification and verification
Reporting to Lithuanian FIU
Keeping records and client data
Employment of Lithuanian AML officer
Preparation and implementation of AML/KYC policies and internal control procedures
WARNING! “Ready-made” crypto companies frequently offered by different intermediaries are not recommended because it is a red flag for the regulator. There are few regulatory warnings addressed to financial institutions already issued. AML policies of “Ready-made” companies usually are exactly the same, don’t reflect the company business model, and don’t meet regulatory requirements. It is extremally difficult for this kind of companies to find banking partners. You need to be extremally careful with the “Ready-made” companies having 2500 EUR minimal capital and/or registration address Perkunkiemio 13-91 Vilnius; Architektu 56-101, Vilnius; J.Savickio 4, Vilnius; Laisves pr. 60, Vilnius; Partizanu 61-806, Kaunas.
Signing notarial company share purchase agreement, change of articles and management may take even longer than the incorporation of the new company and proper authorization for virtual assets related activity. All new Lithuanian company incorporation and Crypto authorization process (including company bank account opening) can be done fast online without personal presence of the company shareholder(s) and director(s) in Lithuania.
ECOVIS experience in crypto authorization
ECOVIS ProventusLaw currently is most experienced Virtual Asset Service Provider authorization advisor in Lithuania. We authorized more than 15 companies including World’s biggest crypto exchange Binance. ECOVIS provides a full set of services of cryptocurrency exchange and crypto currency depository wallet operator authorization including company registration, preparation of all required AML/KYC policies and procedures. After the authorization process, ECOVIS provides tax advice, bookkeeping and Lithuanian FIU compliance services for authorized entities. ECOVIS also assists in the opening of Bank and Electronic Money accounts for Virtual Asset Service Providers.