Crypto License in Lithuania

At the moment, Lithuania is a generally recognized traditional financial jurisdiction in terms of licensing payments and electronic money in Europe. Also authorized by a cryptocurrency exchange operator and a cryptocurrency storage wallet, Lithuania is one of the few member states of the European Union and the European Economic Area (EU/EEA) to offer a license for virtual currency transactions and crypto wallet and custodian services license.

Moreover, it is here that the world’s largest cryptocurrency exchange Binance is located, which accounts for a significant part of operations with digital assets.

There are only two types of licensing of cryptocurrency activities:

• a cryptocurrency exchange operator is a company or branch of another company that exchanges the cryptocurrency owned by customers for another or for fiat money for a fee.
• a cryptocurrency wallet operator is a company or branch of another company that operates clients’ cryptocurrency wallets.

The activities of cryptocurrency exchange operators and cryptocurrency wallet operators must be separated from licensed traditional financial activities (payment institutions, electronic money institutions, etc.). However, licensed financial institutions can serve fiat payments of crypto-currency companies and their clients, creating an efficient mechanism for crypto-related fiat payments.

With a license to exchange cryptocurrencies, you can offer customers three types of services:

1. exchange between different types of coins based on a weighted average or individually set rate, most often it is a cross-rate through linking to the most popular coin – bitcoin;
2. buying various crypto coins for fiat money;
3. sale of various crypto coins for fiat money.

The second type of license makes it possible to provide cryptocurrency storage services. Recall that the digital currency does not have a physical expression, access to it is possible using a password through various options for electronic wallets. The security of the platform is very important here, which ensures the protection of the wallet – all transactions with coins are irrevocable. In case of loss of the password, it is almost impossible to restore access to finances.

That is why it is so important to keep your digital assets in a safe place, protected from unauthorized access, and at the same time accessible enough for quick transactions.

A very important point is that only a legal entity officially registered in Lithuania and having not only a legal address but also a physical office can apply for and Obtain Crypto License in Lithuania. The Lithuanian Registrar of Legal Entities must be notified about the implementation of activities related to cryptocurrency, as well as the measures taken to combat the legalization of proceeds from crime. The operators of cryptocurrency exchanges and wallets for storing cryptocurrencies are supervised by the Financial Crime Investigation Unit – FIU. One of the equally important requirements for the organizers of the company – all members of the board, as well as the ultimate beneficial owners (UBO) of the company must meet the requirements of an impeccable reputation.

The Republic of Lithuania is considered one of the most popular destinations for supporters of digital assets, since the country’s legislative framework provides for relatively loyal requirements for issuers. After registering a crypto company in Lithuania, you will need to obtain an activity permit, and the conditions for obtaining such a permit are quite simple. You can register a Crypto exchange company in Lithuania remotely, and the registration procedure can be implemented in a relatively short time. Moreover, all necessary documents can be submitted to the relevant authorities by authorized representatives of the owners of the company.

It should be taken into account that the legal framework of the country does not establish restrictions on foreign property, so the founders and directors of a crypto company can be non-residents. In addition, you do not have to necessarily hire local staff. Another advantage of opening a crypto company in Lithuania is one of the lowest corporate tax rates in the EU (only 15%).

Despite the simplicity of paperwork, there are mandatory requirements that apply to companies. In order to apply for a Lithuanian cryptocurrency license to provide cryptocurrency exchange and/or wallet services, you must first set up a Limited Liability Company (UAB).

In this case, the newly created enterprise must have the following features:

• At least 1 shareholder (individual or legal entity). At the same time, there are absolutely no restrictions on citizenship or place of residence – everything is quite loyal;
• At least 1 board member (can be the same shareholder, also without residency requirements;
• Appointment of a local AML compliance officer (may be a member of the board of directors), who must have relevant experience – such requirements are increasingly heard around the world in relation to financial companies;
• The minimum authorized capital is only 2500 EUR, the maximum is not limited;
• Proof of a local office is required. Recently, a virtual office has been allowed, but a real physical office is more trustworthy;
• Details of beneficial owners are mandatory disclosed to the authorities.

Thus, to open a Lithuanian company operating as a crypto business is a fairly simple procedure, it usually takes from several days to several weeks in time. An already open company can be purchased on a turnkey basis – for the opening of a new type of activity.

To submit all documents for obtaining a cryptocurrency exchange operator license , one must become a happy owner of a legal entity in Lithuania. This can be done in two ways – to open a new company, starting with a unique name, or to acquire an already established enterprise. As soon as a legal entity is created, you can start collecting a package of documents and submit an application.

In order to successfully apply for and obtain a license when opening a Lithuanian company to conduct transactions with digital assets, the following documents will be required:

1. A valid copy of the passport from the country of residence;
2. A power of attorney is needed if the owners are not present in person, and the procedure for opening a company and obtaining a license takes place remotely);
3. The most detailed description of the future activities of the company;
4. A summary of the experience and education of all participants in the cryptocurrency-related project;
5. Website address where cryptocurrency services will be offered;
6. Mandatory – a certificate of good conduct (not older than 3 months) for owners, managers, beneficiaries (UBO) and AML employees;
7. Details of all beneficiaries must be provided upon request by FCIS.

The set of documents is not too big, it is quite easy to assemble it.

Lithuania cryptocurrency regulation is not so strict, but certain requirements are also imposed on the structure of the company, in particular:

• At least 1 shareholder and board member, with no restrictions on citizenship;
• Mandatory – AML Compliance Officer. Previously, it had to be a Lithuanian citizen, an AML specialist, now the citizenship requirements have been removed.

It is important to select the right candidate for the position of AML Compliance Officer, as he/she is the one who will have to communicate with FCIS, respond to their requests and be responsible for ensuring that all procedures and requirements are followed. It is the inefficient activity of such an employee that can lead to the revocation of the license in the future.

The appearance of a compliance director has become a mandatory requirement for obtaining a license to conduct cryptocurrency exchange operations in almost all countries. Numerous universities have already engaged in the training of specialists of this level, the safety of ongoing operations has been declared the main goal of issuing licenses and conducting inspections of existing platforms. Of course, different countries have their own safety requirements, but the fact that their observance is given priority is already indisputable.

The responsibilities of the Compliance Officer include, but are not limited to:

• organizing the collection and analysis of information related to transactions suspected of money laundering or financing of illegal activities that have become apparent in the activities of the obligated person;
• reporting to FCIS in case of suspected violation of AML/CTF policy;
• periodic submission of written compliance statements to the board;
• performance of other duties and obligations related to compliance with the requirements.

General requirements for a Compliance Officer include:

• only a person who has the education, professional suitability, ability, personal qualities, experience and impeccable reputation necessary for the performance of duties;
• the company should organize specialized training on money laundering prevention measures for its employees, especially those who work directly with customers and their transactions.

Thus, the qualification level of the employee must be high enough for the company to continue to meet all the requirements put forward.

The Central Bank of Lithuania is the main regulator of the activities of crypto companies, issuing licenses and further monitoring the activities of companies. It is the Central Bank that has the right to revoke a license at its own discretion or at the request of FCIS. The Central Bank of Lithuania insists on separating the activities of traditional financial institutions and companies dealing with cryptocurrencies. At the same time, virtual assets can be in circulation of traditional market players.

Registering a new company can take up to several weeks. If there is no time for registration, you can always purchase a ready-made company that has already been registered and meets all the requirements of regulatory organizations. There is an opportunity to become the owner of a company that has already carried out certain activities and has established itself well in the market.

Obtaining a cryptocurrency license entails preparing documentation of the company’s internal procedures in order to comply with the anti-money laundering (AML) and Know Your Customer (KYC) criteria set by the FCIS. Companies are required to take the following steps to assess the risks of each client and each transaction they conduct:

• Conditional determination of the level of risk.
• Classification of possible risks.
• Clear control procedures for each transaction.
• Disclosure of information about the origin of funds.
• Monitoring the compliance of the received information and internal audit.
• Definitely due diligence.
• Fulfillment of the obligation to notify the relevant authorities.

Identification of risks allows you to identify potentially unreliable clients, prevent money laundering and financing of criminal communities.

Cryptocurrency companies are regulated by the AML Law of 2020, where the requirements to counter the use of digital assets for criminal purposes are at the forefront. Otherwise, all operations, licensing, control are carried out on the basis of decisions and internal documents of the Central Bank of Lithuania.

Crypto licenses are controlled by the Lithuanian Financial Crimes Investigation Service (FCIS). It is this institution that monitors compliance with all the requirements of the law on the prevention of money laundering and “Know your client”.

At any time, FCIS may send a request for any transaction that has raised certain doubts, require a client report or request other information regarding ongoing transactions.

The Compliance Officer has the following responsibilities:

• regularly submit reports to FCIS on compliance with all regulations and the implementation of all procedures;
• promptly notify of all suspicious transactions or customers;
• also promptly respond to all inquiries related to the company’s operations.

It is very important to fulfill all the requirements of the specified service in a timely manner – this is one of the licensing conditions.

In some cases, when cryptocurrencies are recognized as earned income, investors may be required to pay corporate income tax. However, this is not too expensive – according to Lithuanian cryptocurrency legislation, investors can also be charged personal income tax, at a standard rate of 15%.

The taxation of virtual currency transactions depends on the nature of the transactions. There is no direct tax if the token is sold or bought in a similar way to a security, investment or other currency. Such loyal taxation is also one of the reasons why the Lithuanian market is so attractive for digital asset operators.

The license does not have an expiration date, but recently there have been cases of its revocation. The Law on the Prevention of Money Laundering and Financial Fraud establishes some cases in which a cryptocurrency license can be revoked:

• the enterprise repeatedly fails to comply with the instructions of the supervisory authority;
• the company has not commenced operations in the requested field of activity.

However, these reasons are not limited. In any case, in order for the license to be revoked, the company must repeatedly violate AML / KYC requirements.