Lithuanian authorities intend to significantly tighten the requirements for Crypto Asset Service Providers (CASPs) when implementing the Markets in Crypto Assets Regulation (MiCAR)

In view of a significant increase in the risk of the crypto-asset sector, Lithuanian authorities are tightening the requirements for companies providing these services in Lithuania.

The heads of the Bank of Lithuania, the Ministry of the Interior, the Ministry of Finance, and the Financial Crimes Investigation Service (FCIS) in their joint statement recently highlighted that the crypto-asset market must be properly controlled, therefore, it is necessary to strengthen the legal regulation in Lithuania.

For this purpose, public authorities without waiting for the requirements of the MiCAR to enter into full force, prepared several draft laws setting new operational requirements for CASPs and established their licensing process.

Namely, the following changes shall be taken into account:

• the Bank of Lithuania will be responsible for licensing CASPs and, together with the FCIS, will share their supervision in the field of money laundering prevention and terrorist financing;
• the FCIS will be granted with a right to investigate CASP’s compliance with statutory capital requirements, i.e. whether CASP in fact possess not less than EUR 125,000 mandatory capital by investigating its bank account or applying other physical measures;
• most importantly, the draft laws propose not to apply a transitional period of 18 months to obtain a MiCAR license in Lithuania. This means that all CASPs established in Lithuania must secure their MiCAR license by the end of 2024. This is reasoned due to the emerging significant risks of money laundering, terrorist financing, circumvention of international sanctions and fraud in this sector leading to the need for the preparation and implementation of this Regulation in Lithuania to start as soon as possible;
• according to draft laws, CASPs currently operating in the market will be required to file their applications for a licence to the Bank of Lithuania no later than 1 July 2024;
• the Bank of Lithuania stresses that only CASPs who pay due attention to compliance, anti-money laundering and terrorist financing requirements and quality of services will be eligible for a licence.

The fact that crypto-asset service providers, like other financial market participants, will be regulated and that there will be consumer protection requirements constitutes the fundamental change.

Lastly, the Bank of Lithuania repeated its position that the regulated financial market participants cannot engage directly in crypto-asset services (for more details please refer to the current publication of the Bank of Lithuania).

Should you have any additional questions, please do not hesitate to contact our Banking & Finance practice.

Read Ellex Valiunas’s Banking and Finance team insights about navigating the Markets in Crypto Assets Regulation here.