An Overview of Lithuanian Crypto Regulation

Lithuania has developed a strong reputation over the past few years concerning its approach to crypto market innovation. Financial transactions using cryptocurrency are entirely legal in Lithuania, and the requirements to set up a business have traditionally been relatively simple, making the country an appealing prospect to crypto-focused business owners.

Those looking to work with virtual currency in Lithuania can obtain two different types of registrations (authorizations) by providing mandatory notification to the Register of Legal Entities:

  • Cryptocurrency Exchange Authorization
  • Crypto Wallet and Custodian Services Authorization

It should be noted that the authorized activities of Cryptocurrency Exchange and Crypto Wallet and Custodian Services are supervised by the Financial Crime Investigation Service (FCIS) in the context of the prevention of money laundering and/or terrorist financing.

The first type of authorization allows the company that holds it to exchange FIAT currency into cryptocurrency and vice versa. This authorization also allows the company to exchange crypto into crypto, opening up a pathway to becoming a fully-fledged cryptocurrency exchange.

The second type of authorization allows the company to set up a digital crypto wallet for clients and store their cryptocurrency. The authorization also allows the company to generate encrypted private keys.

Combine this with Lithuania’s low level of corporate tax, set at just 15%, and it’s clear why the country has become a hotbed for innovation in regards to decentralized finance (DeFi) and NFTs.

‘Favourable’ Regulatory Requirements for Lithuania-based Companies

When a company registers as a VASP, the FCIS, as the supervising authority, will require specific standards to be met. These standards are put in place to combat money laundering and terrorism financing, which are issues that have plagued the crypto market since its inception.

Countries worldwide have struggled to balance creating a safe environment and allowing companies to innovate and thrive. However, Lithuania's government opted to establish a law titled the 'Law on the Prevention of Money Laundering and Terrorist Financing', which sought to aid both of these areas.

Under this law, Lithuania’s guidelines have been tailored so that it is relatively simple to set up a crypto-related business in the country, relative to certain other regions. Detailed below are some of the key requirements to operate as a VASP company at the time of writing:

  • Establish a limited liability company (UAB) with at least €2,500 in share capital and a minimum of one shareholder and one director
  • Have a Money Laundering Reporting Officer (MLRO) with a solid reputation and that is officially employed by the company
  • The company must report to the FCIS
  • The company must keep records and customer data
  • The company must have a local address for government correspondence (it can be a virtual office)