CRYPTO LICENSE IN LITHUANIA
Entire legal support in obtaining a Lithuanian crypto license with a guarantee of the turnkey within 4-6 weeks
In order to apply for a crypto license in Lithuania, you must have a limited liability company (UAB) to provide cryptocurrency exchange or storage services. From 1.11.2022, according to the new legislation, the share capital requirement of such company is 125,000 EUR. Previously, the minimum share capital was 2,500 EUR. Besides, the new law includes the formation of the special register with a list of crypto companies and the requirement for an exclusive AML officer. UAB (LLC) legal form allows conducting activities of custody wallet operator, as well as cryptocurrency exchange services.
It is important to know that the new Lithuanian legislation allows registering a crypto company WITHOUT an authorized capital contribution in ANY amount at ANY time, despite the requirement for of registered capital of 125,000 EUR.
Thus, unlike most other European jurisdictions for crypto businesses, Lithuania hass the fastest, most economical clear understanding of the future with some principles of the MiCa Directive already implemented.
The activities of virtual asset service providers in Lithuania fall under the next types of crypto licenses:
- Cryptocurrency exchange license — allows a company to exchange virtual currency against FIAT and vice versa, or virtual currency exchange between each other, and as a result gain commission for the services provided.
- Cryptocurrency wallet license (cryptocurrency custodial services) — allows a company to keep on its own wallet virtual currencies on behalf of the client as well as keep encrypted private keys from the wallets.
Both licenses are under the supervision of the Lithuanian Financial Crime Investigation Service (FCIS).
List of capabilities for VASP registered in Lithuania
Exchange crypto to crypto
VASP Companies are authorized to offer exchange services between different types of virtual assets (utility tokens and coins). At the same time, the trade of security tokens is not allowed, since it requires an additional investment firm license
Exchange crypto to fiat and fiat to crypto
Crypto license in Lithuania allows its holder to offer the services for exchanging cryptocurrency for fiat currency and vice versa, meaning their customer can buy or sell available utility tokens for currencies such as US Dollar, Euro, British pound, etc
Storage crypto on behalf of the users
The VASP License allows its operator to store crypto assets on behalf of their customers through custodian wallets, meaning that operator can open wallet for the customer and private keys will be held by the VASP
Fiat storage and Exchange
VASP may accept fiat currency as a prepayment for services (generally, to exchange it for cryptocurrency). This prepaid amount in fiat currencies may be reflected in the Client's account as a "balance in fiat currencies". Even though custody of fiat funds is not allowed under the VASP license, operator can store the prepayment for indefinite amount of time, but it should be exchanged in the end to crypto
Informational services on the balance
Authorized VASP has the authority to manage and safeguard cryptocurrency depository wallets belonging to clients, and store and provide clients with information services on balances, and incoming and outgoing transactions
Send crypto to the 3rd party on behalf of the client
VASP may offer services to transfer cryptocurrency from the Client's wallet to a wallet specified by the Client by their order, being an intermediary. This service is a crypto alternative to wire transfers in fiat currency
ICO
The Lithuanian VASP can also conduct ICOs, in which an offer to buy its cryptocurrency is made for the first time through the VASP. It is important to note that under an ICO, VASP company is only allowed to issue utility tokens
Staking
VASPs have the right to use stacking as an additional tool to generate passive income from cryptocurrencies. Many blockchains use Proof-of-Stake consensus algorithms and their counterparts. This is a profitable alternative to classic cryptocurrency holding and is analogous to bank deposits in crypto. Yields can reach 10% per annum and higher
Packages of services for crypto license in Lithuania
Choose the best package of services for obtaining a crypto activity license in Lithuania
The offer is made in accordance with the legislation of 1.11.2021
Lithuania crypto license requirements
After Lithuanian AML Law amendment in 2022 June 30 No. XIV-1374 new requirements for Lithuanian crypto license were introduced:
- Registered share capital shall be at least 125 000 EUR, however there's no own funds monitoring requirements and solution without actual contribution of the funds exists
- Requirement to appoint exclusive senior employee (AML Officer), who shall be permanent tax resident of Lithuania. AML Officer shall be employed to the VASP and receive salary agreed
- Licensed Lithuanian crypto company shall take into account the local market and organize some essential activities through Lithuania
- Reputational requirements, like absence of valid criminal record, were also established for VASPs senior management, shareholders and beneficial owners
- Prohibition for opening anonymous accounts as well as lower limits (€700) for clients identification
Other requirements, as reporting to FCIS (including obligatory reports based on transactions' value) and obligation to keep records with customer data, remain the same and include:
- Obligation to have in place policies aimed to prevention of money laundering and terrorist financing
- Obligation to fulfill international sanctions regimes
- Obligation to identify customers and store their data
- Obligation to implement risk-based approach in the course of licensed activity
- Obligation to report suspicious transactions and certain operations
- Other obligations arising from applicable law
There’s no obligatory requirement to have local director for Lithuanian VASPs and therefore foreign individual can ensure secure control over the VASP’s activity
Procedure for obtaining a Cryptocurrency License in Lithuania
After 6-8 weeks company will be fully registered as a Virtual Asset Service Provider and 2-3 weeks will be required extra to become fully operative and open a Bank account
Stage 1
PRELIMINARY PROJECT ASSESSMENT
Result: All the needed documents for the process initiation are collected.
Collecting preliminary set of the documents from the Client side:
- 1.An up-to-date copy of the passport of the country of residence (scan)
- 2.A business model of the company (brief description 1-2 A4 pages)
- 3.Preferred company name is provided
- 4.Filled customer profile(s) from all the participants of the project are collected
- 1.Address of residence for each participant is provided
- 2.Budgets and scope of the project are approved according to the initial workshop
- 3.Gofaizen & Sherle operational department has drafted PoA and shared it with the Client along with further steps
Stage 2
REGISTRATION PROCESS
Result: The company is registered as the Virtual Asset Service Provider with the share capital of 125 000 EUR
- 1.Upon the documents (hard copies) receipt on hands by Lithuanian office, the sworn translation to Lithuanian language is conducted
- 2.Assistance in opening start-up account for the formation of the authorized capital of 2500 EUR
- 3.Client has transferred share capital in the amount of 2500 EUR and we have collected printout from the Bank
- 4.Drafting Articles of Association and other supplementing documents in accordance with the Client's company corporate structure
- 5.The notary deal is arranged and conducted
- 6.Processing and transfer of the documents to the commercial registry with the further entry within the registry
- 7.Company entry appears in the commercial register after one week
- 8.Assistance with share capital increase
- 1.Adaptation of Articles of Association under new share capital level
- 2.Submission of a special JAR form to the commercial registry along with the list of beneficiaries to register a company by the commercial code of activity as a Virtual Asset Service Provider (Action is done simultaneously with the share capital increase)
- 3.Ordering a set of corporate documents from the commercial registry (electronic form) in the Lithuanian language (Registry card; Articles of Association; List of Shareholders)
- 4.Conducting sworn translation of the corporate documents into the English language
- 5.Notarization and Apostille of corporate documents
Stage 3
LICENSING PROCESS
Result: The company has all the infrastructure settled for the activity of VASP as required by the regulation as well as needed for conducting the operating activity within the legal framework of Lithuania
- 1.The Client will be presented with a list of 30-40 questions (to identify risk appetites, the geography of the customers, nature of the business, etc.)
- 2.Integration of the answers into the main set of the documents (adaption of customer due diligence measures, implementations of sanctions, collecting and storing data, principles of verification, etc.)
- 3.Search for premises for rent based on the Client preferences (size, cost, location, infrastructure)
- 4.Contacting landlords and concluding a lease agreement directly with the Client's company
- 5.Key handover (Later, when it is suitable for the Client)
- 6.Assistance in choosing a KYC/KYT provider compliant with Lithuanian AML legislation
- 7.Providing legal assistance in setting up KYC/KYT software and integrating the principles of the project
- 8.Adaptation of the company's internal documentation under the relevant KYC / KYT provider
- 1.Search for a candidate for the AML/KYC officer position that meets regulatory requirements and the expectation of the project with subsequent approval by the Client of a candidate for the role
- 2.Integration and training based on the principles of the Client's operating activities
- 3.Providing and configuring access of AML officer to the electronic state environment for further reporting on suspicious and nonstandard transactions
- 4.Arranging direct employment relations between Client’s company and AML officer (preparing employment agreement, registering AML officer with tax authorities of Lithuania, SODRA)
- 5.Notifying FCIS/FNTT in regards to the appointment of the selected candidate for the position of AML officer and as a responsible person for further communication with the supervisory authorities
- 6.Further monitoring (on the monthly basis) of AML officer on FNTT/FCIS reporting issues, regular trainings, assistance in communication with regulatory bodies (assistance in answering queries; questionnaires and targeted requests from FCIS/FNTT)
- 7.Filling out a forms and submitting notification to the Financial Crime Investigation Service (FCIS) in regards to the virtual currency wallet and exchange operator activities
Stage 4
CORPORATE ACCOUNT OPENING AND ACCOUNTING
Result: The company has an operational corporate account under crypto with connected accounting service
- 1.Analysis of the most suitable Banks/EMIs, comparison of the risk appetite of the Bank in relation to the risk appetite of the Client based on previously prepared AML policies (Done simultaneously with premise search)
- 2.Collection of necessary documents from the Client side to initiate the process (flow of funds, source of wealth, description of the purpose of opening an account, key partners, company website, utility bill, etc.)
- 3.Initiation of the onboarding procedure simultaneously in 2-3 crypto friendly EMI's
- 4.Guiding the Client's company through the entire process of opening an account
- 1.Acquiring connection (if necessary)
- 2.Development of accounting rules for the client's crypto company
- 3.Integration of an accountant and preliminary consultation on the conduct of activities within the framework of crypto accounting
- 4.Initial set up and connecting to an accounting program
- 5.Further monthly accounting services
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Taxation of crypto companies and cryptocurrency transactions in Lithuania
Taxation of crypto companies in Lithuania
- Virtual currency exchange services and wallet services are not considered as financial services and therefore are not subject to VAT
- Services provided and accounts paid in virtual currencies are subject to normal VAT rules
- The cryptocurrency company’s profits are taxed at a rate of 15%. A small company with less than ten employees and less than 300,000 euros of gross annual income may be taxed at a reduced corporate tax rate of 0-5%
- Income tax (WHT) 15% is levied on distributed profits (dividends paid)
Taxation of transactions with cryptocurrencies in Lithuania
The taxation of transactions in virtual currency depends on the nature of the transactions. There is no direct tax if the token is sold or purchased similarly to a security, investment or other currency
Payment of goods or services in virtual currency does not exempt from VAT. Sales are considered normal/regular, even if payments for goods and services are received in virtual currencies. For accounting purposes, the transaction must have a value in euros and VAT rules are applied as for transactions with fiat currencies used. If VAT is applied to payments in fiat currency, it should also be applied to payments in virtual currency. VAT declarations must be submitted in euros and VAT should be paid or returned in euros
FCIS (FNTT) as Lithuanian supervisory body for VASP’s
Register of licensed crypto companies is kept by Lithuania Centre of Register, however activities related to virtual assets are supervised by Financial Crime Investigation Service (FCIS, in Lithuanian: Finansinių nusikaltimų tyrimo tarnyba or FNTT) - law enforcement agency under the Ministry of the Interior, which is part of Financial Intelligence Units' international network. FCIS activities are aimed to prevention of money laundering, terrorist financing and violation of sanctions. Lithuanian FIU is also responsible for investigations related to financial crime, including VAT-related and other tax machinations, money laundering, and illegal receipt or use of financial assistance from the EU. FCIS is actively participating in National Crime Prevention and Combating Corruption Program and constantly developing methods to engage society in the fight against financial crime. This authority regularly issues orders describing certain aspects of legislation in the AML/CTF field, which are directly applicable to the relevant obliged entities.
Supervision under crypto companies is primarily performed by FCIS through targeted inspections which are planned 1 year in advance. FCIS is publishing list of companies being supervised this way at the beginning of the year, however unplanned targeted supervision also possible in certain circumstances.
In 2023 FCIS also introduced regular reporting for VASPs, which shall be performed annually. Such approach certainly will affect market's transparency and allows performance of more effective supervisory approach.
AML Officer
Lithuanian AML law requires from VASPs to appoint appoint AML Officer (leading employee) who would organize the implementation of money laundering and/or terrorist financing prevention measures set out in the AML law and cooperate with the FCIS. In addition, when the company is managed by a board, it must appoint a board member to organize the implementation of money laundering and/or terrorist financing prevention measures. The appointment of such employees and board members must be notified in writing to the FCIS no later than 7 working days after their appointment or replacement.
AML Officer appointed shall have the appropriate education, work experience, and skills necessary for implementation of risk-based approach inside the company. In addition, the person's reputation has great importance here. After new law came into force, AML Officer appointed to crypto company shall be permanent tax resident of Lithuania and restriction for appointment to more than one VASP applies.
AML Officer performs the following functions in the company:
- Ensure that the AML/CFT, sanctions policies, procedures and internal control measures are adequate and proportionate, taking into account the characteristics of the company and the ML/TF, sanctions risks to which it is exposed;
- Develop and, when necessary, update the company’s internal policies related to AML/CTF and sanctions;
- Ensure that there is periodical reporting to the CEO on the activities carried out by the AML officer and that the CEO is provided with sufficiently comprehensive and timely information and data on ML/TF, Sanctions risks and AML/CFT, sanctions compliance, which is necessary to allow the CEO to carry out the role and functions entrusted to it;
- Informing the CEO of any serious or significant AML/CFT, sanctions issues and breaches and recommending actions to remedy them;
- Monitor and verify on an ongoing basis that the company is fulfilling the requirements prescribed by internal policies established and according to applicable laws and regulations;
- Provide other employees with advice and support regarding the rules related to AML/CTF and sanctions;
- Inform and train the employees about the rules relating to AML/CTF and sanctions;
- Investigate and register sufficient data on received internal notifications and decide whether the activity can be justified or whether it is suspicious;
- Filing and sending of the relevant reports (e. g. SAR, CTR);
- Develop and maintain an ML/TF risk assessment for business-wide and individual ML/TF risk assessments;
- Cooperate and communicate with FCIS;
- Inform the CEO whether the human and technical resources allocated to the AML/CFT and sanctions compliance function are insufficient and should be reinforced;
- Approval for establishing, or continuing the business relationship with a PEP, correspondent relationship and other high-risk customers;
- Perform other functions which are assigned to the AML Officer under the applicable law, internal policies, job description.
Sanctions for failing to comply with the AML/CTF regulation
There's many supervisory authorities (e.g. Bank of Lithuania, Chambers of Notaries, Auditors, etc.), which are responsible for imposing of fines to obliged entities, but for VASPs only FCIS may perform inspections, make orders for elimination of deficiencies and impose fines.
Lithuanian AML law establishes the following measures may be implemented for the purpose of ensuring fulfillment of regulation by VASP:
- Issue of mandatory instruction;
- Issue of warning;
- Imposition of fine;
- Temporary or permanent senior managers or other employees removal and/or revocation of their powers;
- Temporary or permanent suspension of the activities and/or prohibition for provision of services;
- Revocation of license issued.
From the responsibility’s point of view Lithuanian AML law defines gross and systematic violations, which have more significant importance and more strict regulatory measures. Amount of fine may be imposed depends on the company’s annual income and may grow up to 10% of the gross annual income received in the course of licensed activity.
FAQ about Lithuania crypto license
In which countries can a crypto licensed entity in Lithuania provide its services?
Lithuanian law does not expressly prohibit the geographic areas from which VASP can accept Clients.
However, all possible risks must be identified and documented by each VASP. In the event of increased risk, appropriate and sufficiently extended due diligence measures shall be applied to Customers. In particular, those whose place of residence is in one way or another associated with a higher area of risks and violations of law.
What steps are required to take?
- Request a second identity document,
- Requesting a document confirming the availability of funds,
- Conducting additional searches in information databases,
- Setting a limit on the allowed daily/monthly transaction, etc.
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