Crypto License in Lithuania

Crypto-authorization process in the Lithuania Virtual Currency Registry

The crypto authorization process to get started in Lithuania requires a methodological approach and a good understanding of the licensing requirements. The complete course of action takes about 2 months, not counting the opening of a corporate account once the VASP license has been issued.

The process naturally begins with incorporation of a limited liability company in Lithuania, a so-called UAB (“Uždaroji Akcinė Bendrovė”). Only a company registered in the country can apply for the Lithuanian crypto license.

The company is not required to rent a physical office space in Lithuania. It can work with a legal address and a postbox.

To enter a company in the Lithuania virtual currency registry, there are requirements of three natures to be fulfilled beforehand:

• Monetary: the share capital of the company should be no less than 125,000 EUR, a quarter of which (31,250 EUR) shall be deposited into a bank account in a Lithuanian credit institution;
• Personnel: a Lithuanian resident AML officer shall be appointed by the company;
• Compliance: the company shall prepare the AML/KYC procedures and internal policies.

The registration of Lithuania Company in Register of crypto currency companies

Prior to beginning the application process for the VASP license in Lithuania, the requirements listed above must imperatively be met. The FCIS (Financial Crime Investigation Service) will not be indulgent with an applicant that is not meeting its expectations.

The AML officer has to be officially employed by the company, bound by a work contract. This employee will be responsible for communication and reporting with the Lithuanian authorities.

AML/KYC procedures of the company must give a clear understanding of what to do and what level of due diligence applies in every case. They also give directions to employees, as it is required and expected for the company personnel to receive a yearly training on compliance.

Additionally, the director shall demonstrate “impeccable reputation” to the financial authorities.

The FCIS and Center of Register may also ask for additional information and auxiliary documents if they feel that it would be coherent to the application.

Governmental Statements on Crypto in Lithuania

Though the Lithuanian crypto license has existed since 2018, it really appeared on the industry radar in 2021 as a consequence of Estonia’s crypto license becoming significantly harder to get (and to keep).

This shall not be understood in a way that would depict Lithuania as a less serious or regulated country. Simply put: its licensing procedure is less costly than in its northern Baltic neighbor.

The Central National Bank of Lithuania has been reportedly working on helping the country become a pioneer in the blockchain industry from 2016.

In late 2022, when the regulation was lastly updated, the Lithuanian governmental authorities stated that it was a necessary step forward to better safeguard customers. The changes were also relevant to the geopolitical context, making it harder to use the services of Lithuanian crypto companies in order to bypass international sanctions.

Requirements for companies engaged in crypto activities in Lithuania

Virtual asset services providers in Lithuania are required to meet a high level of AML/KYC enforcement. This is the focus point of any company willing to engage in crypto activities in Lithuania.

Getting the crypto license in Lithuania subsequently depends on the satisfactory fulfillment of compliance requirements:

• Preparing AML policies for monitoring and reporting transactions;
• Preparing KYC policies for client identification and thresholds of enhanced due diligence;
• Hiring a qualified Lithuanian AML officer, whose function is to apply the AML/KYC policies and to communicate with the Lithuanian authorities.

Additionally, basic corporate requirements do apply as well:

• Incorporation of a Lithuanian company;
• A registered address in Lithuania (does not need to be an office space);
• Opening a corporate account in Lithuania, to deposit the authorized capital (the money can be used by the company afterwards);
• Accounting, bookkeeping and annual filing are mandatory;
• A director has to be appointed, but doesn’t have to be a resident of Lithuania.

All in all, the requirements are fairly straightforward and in line with the conduct of crypto activities. Their fulfillment shows accountability from the project and shows them in a positive light to the regulator.

The process of setting up a company for a cryptocurrency business in Lithuania

Incorporating a Lithuanian limited liability company (UAB) is simple and fast. Many entrepreneurs from the fintech space have been opening Lithuanian UABs to conduct business.

Setting up a company for a cryptocurrency business in Lithuania takes around 2 business weeks.

Upon providing the necessary information, the registration process begins. The documents to provide in that regard are simply a certified ID/passport and a proof of residence. Naturally, the future applicant shall also describe the intended business activity.

Taxation for cryptocurrency companies in Lithuania

The corporate income tax in Lithuania, applied to the profits of all Lithuanian companies, is 15%. New companies generating less than 300.000 EUR of revenue in the year and employing less than 10 people can benefit from a reduced rate of 0 to 5%.

VAT doesn’t apply to financial services. This encompasses crypto exchange and providing custodial services, for what is relevant to crypto companies in Lithuania.

Dividends paid from a Lithuanian company are subject to a 15% tax rate. However, shareholders of a Lithuanian company shall consult a tax lawyer and check for double taxation treaties.

Obligations for crypto companies in Lithuania

A crypto company in Lithuania is required to enforce strong AML/KYC rules. These policies shall be described in a set of documents before registering as a VASP, and therefore validated by the Lithuanian Financial Crime Investigation Service during the licensing process.

On the KYC side, this means that a Lithuanian crypto licensed company is required to identify clients before the beginning of a business relationship.

Identification and further confirmation of identity should be conducted in various events, including for example:

• Any transaction amounting to 15,000 EUR or more;
• Any fiat transaction of 600 EUR or more;
• Any crypto transaction of 700 EUR or more;
• Whenever “doubts” or “suspicions” arise from the AML officer.

On the AML side, the duly identified client’s transactions will then be monitored. According to policies laid out before registering as a cryptocurrency business, the company shall report unusual or suspicious transactions, as defined within the internal procedures but not only. Intuition and simple doubt are enough of a motive to report a transaction.

Consequently, the company shall ensure confidentiality of the AML/KYC processes and provide safety and anonymity to its employees reporting suspicious transactions to the authorities.

Sanctions for violating Lithuania crypto-business obligations

Breaching the Law on the Prevention of Money Laundering and Terrorist Financing can lead to various sanctions for the Lithuanian crypto business and its participants.

Non-compliance with the law is first met with a warning, issued by the Financial Crime Investigation Service.

Repeated breaches or more serious offsetting of the regulation may lead to fines, restriction of rights, prohibition to provide certain services and suspension of participants. Several sanctions can be applied at once.

Fines can amount up to 5.1 million EUR for the most serious breaches. Usually, fines are calculated on a percentage of the annual income of the company. The sanctioned entity shall pay its fine within 40 days of the announcement of the sanction.

In a worst case scenario, the Lithuanian regulators can suspend and even withdraw the VASP license from a Lithuanian crypto company that would repeatedly breach the law and present critical shortcomings, without being able or willing to fix them.