In light of the strengthened supervision of the cryptocurrency sector by Lithuania, Gofaizen & Sherle, an international legal and management consulting firm based in Europe, has taken the initiative to assist businesses in navigating these new regulations. According to Lithuanian regulators, these new laws will go into effect in November 2022. In addition, the country will prohibit anonymous accounts and establish more stringent requirements for customer identification.
Gofazen & Sherle, which has helped over 500 companies across 30 countries, has a physical presence in Estonia, Lithuania and Germany.
The New Lithuanian Regulations
According to the Lithuanian Ministry of Finance, the national government has approved changes to the country’s anti-money laundering (AML) and counter-terrorism financing regulations that affect the cryptocurrency sector. The newly approved laws will tighten user identification guidelines and prohibit anonymous accounts. The new regulations will also impose stricter requirements on exchange operators. For example, Crypto exchange operators will be required to register as a corporate body with a minimum capital of 125,000 euros beginning January 1, 2023. In addition, their top management must also be permanent residents of Lithuania.
According to Lithuania’s Finance Minister, Skaiste, the country decided to update its regulations in response to recent events in the region, particularly the ongoing military conflict in Ukraine.
Lithuania has seen a rapid increase in the number of crypto companies starting operations since Estonia tightened its crypto regulations. However, only eight such entities were established in 2020, whereas 188 new firms were registered in 2021, with another 40 added in the first months of this year. According to the finance ministry, over 400 crypto service providers are currently operating in Lithuania.
The Estonia Crypto Clamp-down
Estonia’s new regulations represented a sharp U-turn for a country with a population of just 1.3 million but which last year was home to more than half of the world’s registered virtual-asset service providers (VASPs).
The new rules, which went into effect on June 15, required Estonian crypto companies to meet new transparency requirements; they can no longer have anonymous accounts and must have at least €100,000-250,000 in capital.
Estonia has been a pioneer in regulating cryptocurrency-related services. However, until recently, the regulatory framework was very lax, and the entry barrier was low. This changed when existing laws were amended to provide greater clarity and regulation to the cryptocurrency industry. In short, the requirements for providing cryptocurrency-based exchange, trading, transfer, and wallet services will be more akin to those of European e-money institutions and other licensed financial service providers.
Since then the number of new licenses has dropped from 1305 in 2019 to just 81 in 2021. This represents a significant downtrend due to the new regulations.
Lithuania Will Not Be Like Estonia
As the new regulations are approved, many cryptocurrency enthusiasts are concerned that the once-global crypto hub will become another Estonia. Gofazen & Sherle lawyers, on the other hand, is providing businesses with a legal and convenient way to navigate the turbulent waters by receiving instructions from the FCIS in October and devising a strategy to help businesses thrive regardless.
About Gofaizen & Sherle
Gofaizen & Sherle is a leading legal & business consultancy for digital assets-oriented businesses, investment funds and financial organizations focused on EU markets while expanding globally. Its headquarter is located in Tallinn with representative offices in Lithuania, the Czech Republic, and Poland. The firm services scope features company registration, business strategy development, and financial licensing including crypto businesses, EMI, and other types of licenses.