Lithuania currently offers cryptocurrency exchange and crypto currency depository wallet operator registration being one of few European Union (EU) member states having virtual currency licensing and authorisation procedure.
Types of cryptocurrency registration
There are 2 types of cryptocurrency authorisation:
– Crypto currency exchange operator for the exchange of cryptocurrency owned by the client for the commission fee
– Crypto currency depository wallet operator for client cryptocurrency depository wallet management
Activities of the cryptocurrency exchange and crypto currency depository wallet operators need to 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.
AML/KYC requirements for the companies holding cryptocurrency authorisation
Lithuanian registered legal entities (companies) and Lithuanian registered affiliates of EU and non-EU companies can apply for the crypto registration. Lithuanian Legal Entity Registrar shall be notified on the provision of cryptocurrency related activities and AML/KYC measures implemented. Cryptocurrency exchange and crypto currency 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.
General requirements for the entities engaged in cryptocurrency activities:
- Customer identification and verification
- Reporting to Lithuanian FIU
- Keeping records and client data
- Designation of AML Compliance Manager
- Implementation of internal control policies and procedures
Clear ant transparent Crypto regulation
Lithuania is one of few EU/EEA jurisdiction having clear and transparent cryptocurrency regulation. Bank of Lithuania (Central bank and financial regulator) and Lithuanian Tax Inspectorate have officially published positions on cryptocurrency transactions, taxation and other crypto related issues. Private individuals and companies dealing with cryptocurrencies have clear guidance moving funds from traditional fiat currency into cryptocurrencies (Bitcoin, Ethereum, Dash, etc.) and from cryptocurrency back into the fiat currency.
Initial Coin Offering (ICO) authorisation
AML/KYC and other reporting requirement are applicable for the companies carrying out Initial Coin Offering ICO activities and attracting financing through the public distribution of virtual coins to the investors. Lithuanian registered legal entities (companies) as well as Lithuanian registered affiliates of EU and non-EU companies allowed to register and publicly distribute ICO under the Lithuanian law successfully offering virtual coins to the investors in all EU/EEA area.
Security Token Offerings STO licensing
European regulators follow the recommendations of European Central Bank and European Banking Authority that all cryptocurrency-based instruments having features of securities are subject to the laws and regulations regulating public issue of securities.
New European Crowdfunding directive and modern Lithuanian Law on Crowdfunding allow raising of the capital through the security token offerings STO. Lithuanian licensed advisors allowed to distribute securities and other tokenized financial instruments all over the EU/EEA area offering them to the wide range of investors. International Securities Identification Number (ISIN) can be obtained for tokenised securities.
Cryptocurrency investment fund
Financial institutions often face difficulties offering cryptocurrency-based investment instruments to traditional investors because of the regulatory barriers. Lithuanian regulation allows Lithuanian licensed alternative investment funds designed for alternative investors invest their assets into the cryptocurrency and cryptocurrency-based investment instruments. It allows issue of investment units and other investment instruments based on cryptocurrency and distribute them in traditional financial markets attracting professional investors from all around EU/EEA area.
Bank and electronic money accounts for Crypto companies
Cryptocurrency exchange and wallet operators usually need the segregated client funds account with the bank or other financial institution for client funds processing. Opening of the client funds account for crypto company usually is challenging process. ECOVIS selects the bank or other finance institution (EMI, etc.) according to the client risk profile and business needs. If needed ECOVIS assists in the preparation of the client internal AML/KYC procedures required for the account opening. More information on account opening can be found in the link.
ECOVIS provides full set of cryptocurrency exchange and crypto currency wallet operator authorisation services including company registration in Lithuania and preparation of all required AML/KYC procedures. In the field of security token issues ECOVIS assists in preparation of Security Token Offering (STO) documentation such as Securities Issue Prospectus, etc. Bank account for crypto company own funds usually opened during the company incorporation process. Segregated bank or EMI account for client funds opened after the company registration and authorization. After the authorization process ECOVIS provides bookkeeping, regulatory reporting and Lithuanian FIU compliance services for authorised entities.