Over the last five years, the financial and payment services sector in Lithuania has developed rapidly, and today the country is firmly established as one of Europe’s leading fintech centres. Modern financial technology is hard to imagine without cryptocurrencies and other blockchain-based products, so step by step Lithuania has also become one of the main European hubs for crypto exchanges and virtual asset service providers (VASPs).
On June 30, 2022, the Seimas of the Republic of Lithuania adopted a package of amendments to the Law on the Prevention of Money Laundering and Terrorist Financing (the AML Act). The purpose of the AML Act amendments is to tidy up the legal framework for virtual assets and to raise, to a certain degree, the entry threshold for cryptocurrency service providers, which should improve the quality, transparency and reliability of crypto exchange and custody services in the country.
First of all, the amendments refined the definition of virtual currency. Under Lithuanian anti-money laundering law, the term covers all cryptocurrencies and most types of tokens, and is defined as follows:
Virtual currency – definition under the AML Act
Virtual currency is an instrument that has a digital value but does not have the legal status of currency or money, that is not authorised or guaranteed by a central bank or other government agency and that is not necessarily related to currency but that is recognised 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 crypto companies and VASPs in Lithuania
The AML Act amendments also introduced additional requirements for cryptocurrency companies providing crypto-asset exchange and custody services – that is, for both categories of VASP: virtual currency exchange operators and virtual currency depository (custodian) wallet operators. The key provisions are set out below.
Statutory capital of a crypto company in Lithuania
A legal entity established in the Republic of Lithuania that intends to operate as a virtual currency exchange operator and/or a depository wallet operator must have a registered share capital of at least EUR 125,000.
Local AML officer / MLRO for a Lithuanian VASP
A legal entity that has started operating as a virtual currency exchange operator and/or depository wallet operator must have a senior manager who is a permanent resident of Lithuania and must appoint a local AML officer (MLRO) responsible for anti-money laundering compliance.
Servicing the Lithuanian market
A Lithuanian VASP must not provide its services exclusively to customers from another country, or focus on another country’s market to such an 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 crypto company into compliance with the new FNTT requirements
The FNTT (Financial Crime Investigation Service), which supervises Lithuanian VASPs, set a transitional period. Crypto companies that obtained a crypto licence in Lithuania – i.e. registered as a virtual currency exchange operator and/or depository wallet operator – before November 1, 2022 must comply with the new requirements no later than December 31, 2022, and may continue operating without restrictions during the transitional period.
Share capital registration
Cryptocurrency companies operating in the jurisdiction must form a share capital of at least EUR 125,000 by paying the money into the company’s current account, after which the increase in authorised capital must be registered with the Lithuanian Register of Legal Entities and shown on the company’s register card.
Lithuanian company law allows share capital contributions to be staged: 25% of the declared amount is paid at the initial stage, and the remaining 75% must be paid within one calendar year.
Hiring a local MLRO
All active Lithuanian crypto exchanges and custodian wallet providers must add a local AML officer / MLRO to their staff no later than December 31, 2022, sign an employment contract with them and notify the FNTT of the appointment. Our team can provide HR support with recruiting a qualified MLRO for your compliance function from among local residents, formalising the employment relationship, registering it with the tax authority and SODRA, and notifying the FNTT.
What happens if the FNTT requirements are ignored?
Consequences of non-compliance
A crypto company that fails to meet the new AML Act requirements by December 31, 2022 will be removed from the FNTT list of virtual currency exchange operators and/or depository wallet operators and will lose the right to provide crypto services from January 1, 2023.
Assistance in adapting to the new FNTT requirements
Our experts are ready to help you adapt your crypto project and bring your cryptocurrency company in line with the new FNTT requirements: contributing and registering share capital, finding and hiring a qualified MLRO, and resolving the other issues that come up while the company adjusts to the amended AML Act.
Is Lithuania still an attractive jurisdiction for crypto projects?
Yes. Lithuania remains one of the most relevant and efficient jurisdictions for crypto-oriented activities and crypto-asset exchange and custody services, and is likely to stay that way for a long time.
The reason is that local crypto regulation remains one of the simplest, clearest and most liberal in Europe. The AML Act does not impose any extra AML/KYC obligations on cryptocurrency market participants that would needlessly burden or bureaucratise a crypto company’s internal processes. In this sense, Lithuanian state policy towards crypto-assets, its AML/CFT legislation and FNTT practice can be considered a reference point for other European states.
The changes described above – the higher authorised capital (with only 25% of the required EUR 125,000 paid at the initial stage) and the involvement of a local MLRO (Lithuania has plenty of qualified AML specialists) – are neither excessive nor burdensome, and an average participant in the local crypto services market can implement them without much difficulty.
If you are interested in registering a crypto company in Lithuania and obtaining a VASP licence, or if you would like to know more about the changes in Lithuanian AML legislation, please contact our consultants by phone, e-mail or via the feedback form on our website. Further details about the crypto licence in Lithuania are available on the dedicated page of our website.
