In recent years, the global cryptocurrency market has experienced exponential growth. The buzz around Bitcoin, Ethereum, and thousands of other crypto assets has captured the attention of both investors and regulators alike.
Lithuania, a small Baltic nation in Northern Europe, has emerged as a key player in the world of cryptocurrencies by, embracing innovation and establishing a comprehensive regulatory framework.
This is no surprise. Lithuania has long been recognized for its commitment to technological advancements. Like other Baltic countries, it fosters an environment of innovation. And building on top of its success in the fintech sector, they have proactively positioned itself as a cryptocurrency-friendly destination.
This all started in 2014 when the country's central bank, the Bank of Lithuania (BoL), issued a statement recognizing the potential benefits and risks associated with virtual currencies. With that, they set the stage for a regulatory approach.
If you want to obtain a crypto license in Lithuania, then we can help you both set up a company and obtain the license.
What is cryptocurrency?
Cryptocurrency is a type of digital currency that is secured using blockchain technology. It operates independently without the involvement of governments or banks. Bitcoin is the most well-known cryptocurrency, but there are thousands of others, each with its unique features and uses.
Cryptocurrencies can be used for different purposes. They can be used for digital payments, like buying goods and services. People also invest in cryptocurrencies, hoping that their value will increase over time. Cryptocurrencies can be used for fundraising by creating and selling digital tokens. They can also power decentralized applications, which are applications that operate without a central authority.
One of the key characteristics of cryptocurrencies is their limited supply. Most cryptocurrencies have a predetermined maximum supply, meaning that there is a cap on the number of units that can ever be created. This scarcity, coupled with growing demand, can contribute to the value appreciation of certain cryptocurrencies.
Cryptocurrencies can be used for various purposes, including:
- Digital Payments: You can use them as a medium of exchange for goods and services, similar to traditional currencies. Some cryptocurrencies, like Bitcoin, aim to provide an alternative to traditional payment methods, offering faster, cheaper, and more secure transactions.
- Investment and Speculation: Many people invest in cryptocurrencies, hoping that their value will increase over time. Cryptocurrencies tend to have a very hoight price volatility. That presents both opportunities and risks for investors.
- Fundraising: Cryptocurrencies have been used to fundraise through initial coin offerings (ICOs) or token sales. Startups and projects can create and sell their own digital tokens as a way to raise capital to support their development.
- Decentralized Applications (DApps): Cryptocurrencies can fuel decentralized applications built on blockchain platforms. These applications aim to provide decentralized solutions for various industries, such as finance, supply chain management, and social media.
The regulatory landscape surrounding cryptocurrencies varies from country to country. Some nations have embraced cryptocurrencies and established regulatory frameworks, while others have imposed restrictions or bans. That is why it is important to set up your crypto-based business in a country where the rules and regulations are clear and easy to understand. And Lithuania is one of the best countries in that regard.
The Cryptocurrency License: Streamlining Regulatory Processes
A crypto license is a regulatory authorization granted by a government to individuals or businesses. It allows one to engage in cryptocurrency-related activities. This license establishes the legal framework within which cryptocurrency operations can be conducted and ensures compliance with relevant laws and regulations.
The specific requirements and regulations for obtaining a crypto license vary by country. Some countries have implemented comprehensive frameworks specifically tailored to cryptocurrency businesses, while others have broader financial services regulations that cover digital currencies.
In 2018, Lithuania took a significant step forward by introducing a specific licensing regime for cryptocurrency-related activities. The framework, known as the Virtual Financial Assets (VFA) Act, provides guidelines for businesses operating in the cryptocurrency space. The VFA Act aims to enhance investor protection, ensure market integrity, and foster transparency within the industry.
Under the VFA Act, companies that wish to engage in cryptocurrency-related activities must obtain a license from the BoL. The licenses are divided into two categories: cryptocurrency exchange and wallet operators, and token issuers and custodians. Both of those are under the supervision of the Lithuanian Financial Crime Investigation Service (FCIS).
By implementing a licensing regime, Lithuania seeks to create a regulated environment that encourages responsible business practices while safeguarding the interests of consumers and investors.
Obtaining a license
Compared to other European countries, Lithuania offers a faster and more cost-effective process for setting up your business. The country is also aligned with some principles of the MiCa Directive, which is the main regulation for crypto assets in the European Union.
in order to get a crypto license in Lithuania, you need to own or set up a limited liability company (UAB) in the country. You don't have to physically go to Lithuania. You can do it all remotely.
As of November 1st, 2022, entrepreneurs who want to start a crypto business in Lithuania must have a minimum share capital of 125,000 euros. This is higher than the previous requirement of 2,500 euros.The new laws also introduce a special register for crypto companies and require them to have an AML (anti-money laundering) officer. The officer in charge of preventing money laundering and terrorist financing should have experience in the industry, a good reputation and be a resident of Lithuania
The crypto company needs to carefully review every visitor and transaction according to the policy for preventing money laundering and verifying customer identity (AML/KYC Policy).Benefits of getting a Cryptocurrency License in Lithuania
Lithuania's cryptocurrency license offers several advantages for businesses operating in the sector:
- Regulatory Clarity: The licensing regime provides clear guidelines and requirements for companies, ensuring legal compliance and reducing ambiguity in the cryptocurrency space.
- Investor Confidence: By implementing stringent licensing standards, Lithuania aims to enhance investor confidence in the cryptocurrency market. This, in turn, can attract more investments and foster growth within the industry.
- Access to the EU Market: Lithuania is a member of the European Union (EU). That allows licensed cryptocurrency companies to access the EU market under the European passporting rules. This provides businesses with a significant advantage in expanding their operations across the European Economic Area.
- Supportive Regulatory Environment: The Lithuanian government has demonstrated a commitment to supporting and promoting the cryptocurrency industry. They actively engage with stakeholders, fostering collaboration and providing guidance to companies seeking to obtain a cryptocurrency license.
Lithuania's cryptocurrency license and regulatory framework exemplify the country's commitment to fostering a secure and well-regulated cryptocurrency ecosystem. The licensing regime provides legal clarity, enhances investor protection, and supports the growth of cryptocurrency businesses. As the cryptocurrency market continues to mature and evolve, Lithuania's progressive approach positions it favorably in the global landscape, offering an attractive destination for entrepreneurs and investors alike.
Lithuania's proactive approach to regulation makes it a leading European hub for cryptocurrency businesses. The country continues to evolve its regulatory framework to keep pace with the rapidly changing cryptocurrency landscape. By embracing innovation and technological advancements, it strives to create an environment that attracts innovative companies and bolsters its reputation as a forward-thinking fintech and cryptocurrency hub.
To see, how you can benefit from setting up your business in Lithuania, contact us now.