Obtaining a crypto license in Lithuania
Although European jurisdictions, one after another, impose restrictions on cryptocurrency activities, the number of crypto enthusiasts is not decreasing, but only growing. This leads to the need to find countries with a favorable legal environment for doing business related to virtual currencies.
Since 2020, Lithuania has entered the TOP of the most friendly countries for cryptocurrency companies. The country has created the necessary legal environment for conducting crypto business. Such activities are clearly regulated and monitored to avoid the slightest sign of money laundering and terrorist financing. But it is quite possible to obtain permission and engage in the exchange of cryptocurrencies or services for servicing cryptocurrency wallets. If you are ready to conduct business transparently, but without missing out on benefits, welcome to Lithuania!
Lawrange law firm offers the service “ obtaining a crypto license in Lithuania ”. The proposal covers the implementation of all the necessary steps for the full launch and further support of the crypto business, from registering a company, obtaining appropriate permits and opening a current account to preparing AML / KYC policies in accordance with the requirements of the regulator and organizing accounting.
Regulation of cryptocurrency activities in Lithuania
Thanks to a series of steps taken by the government, Lithuania has acquired the status of a European center for the FinTech business. In particular, the capital of this state, the city of Vilnius, welcomes both fintech startups and large international financial companies. Among the reasons for the attractiveness of the jurisdiction for such activities – business-oriented legislation, relatively low costs of registration, licensing and maintenance of firms.
To these advantages, from 2020, another one has been added – the introduction of clear and transparent rules for obtaining crypto licenses without burdening them with bureaucratic procedures and financial requirements.
Note! The attractiveness of Lithuania is increasing against the background of unpleasant changes in the Estonian legislation regarding the licensing of crypto-exchange activities, which were introduced in 2020-2021. These changes include an increase in the minimum authorized capital for crypto companies and the mandatory transfer of the control center to Estonia. Moreover, the head of the Bureau of Money Laundering Data (RAB) announced the possible revocation of previously issued crypto licenses. Likewise, Estonia is rapidly losing its status as a virtual currency-friendly country.
Important! In such circumstances, Lithuania becomes one of the few jurisdictions in the EU, where you can not only legally make transactions with cryptocurrency, but also fully conduct crypto business.
Recall: it is in Lithuania that the world’s largest cryptocurrency exchange Binance is authorized and provides services to European clients.
How is crypto activity regulated in Lithuania?
- The Financial Crime Investigation Service (FCIS) has regulatory powers in this area.
- The concept of “crypto license” in relation to Lithuania is used conditionally, since in fact, a special permit is issued for the provision of services in the field of virtual currencies, and not a license.
- Obtaining such permissions occurs in the so-called notification order – the crypto company submits a notification in the form of a statement that it is going to carry out the relevant activity. A package of necessary documentation is attached to the application.
- FCIS is responsible for verifying the company’s compliance with legal requirements and issuing permits.
*** Note: The Central Bank of Lithuania insists on the separation of traditional financial and cryptocurrency activities. But for traditional market players, it is allowed to have virtual assets in their turnover.
Types of licenses for working with cryptocurrencies in Lithuania
Companies are given a choice of two types of cryptocurrency authorization (licenses, permissions) . It is also possible to obtain both licenses at once.
1. Virtual currency exchange service provider.
Permission “virtual currency exchange operator” provides a legal basis for the operation of the exchanger, that is, the provision of such exchange services with the receipt of a commission:
- one virtual currency to another;
- fiat money for cryptocurrency;
- fiat cryptocurrencies.
2. The service provider stores cryptocurrencies in custodial wallets.
Permission “operator of deposit virtual currency” provides for the provision of services for the creation of encrypted keys for clients in order to ensure the safety, as well as the transfer of cryptocurrency to other persons.
Taxation of cryptocurrency activities
- Income tax (WHT, corporate tax) is 15% in Lithuania.
- Small firms with up to 10 employees and a gross annual income of up to € 300,000 may be taxed at a reduced rate of 0-5%.
- The taxation of cryptocurrency transactions depends on their nature. There is no direct tax if a token is bought or sold by analogy with another currency, securities or investments.
- Dividend tax is levied on distributed profits and amounts to 15%.
- The provision of crypto exchanger services is not subject to VAT.
Company requirements for obtaining a crypto license
To apply to FCIS and obtain permission to conduct a crypto business, you must meet the following conditions:
- register a legal entity in Lithuania in the legal form of UAB (limited liability company)
- at least 1 shareholder and at least 1 director (can be a shareholder);
- have an office in the country (virtual office is allowed);
- the minimum authorized capital for such a company must be at least 2,500 euros;
- board members and ultimate beneficiaries must meet the requirements of an impeccable business reputation, as well as prove that they have no criminal record;
- in advance, you should prepare policies and rules for compliance with AML / KYC requirements, the company should have an employee responsible for AML control.
List of required documents
Equal care should be taken both in the preparation of company documentation and in the collection of documents for individuals involved in this business – ultimate beneficiaries (UBO), directors, shareholders, members of the board . In order to reduce the risks of making mistakes, it is better to entrust the process of preparing documentation to the experts of JSC Lawrange.
In the list of documents for individuals:
- notarized copies of passports from countries of residence;
- proof of current residential address – utility bill not older than three months or bank statement not older than three months;
- Power of Attorney (PoA), when business registration and licensing is done remotely;
- CV or link to a public business profile on social networks (for example, Linkedin) – confirmation of the education and professional experience of all project participants;
- apostilled certificate of no criminal record not older than three months.
In the list of documents for a legal entity:
- Articles of Association and other corporate documents;
- consent from all directors;
- confirmation of opening a bank account in Lithuania;
- detailed description of the firm’s activities (business model and business plan), link to the website.
Procedure for registration of cryptocurrency activities in Lithuania
It is possible to register a company and obtain the appropriate crypto permit from FCIS, either by visiting Vilnius and being accompanied by our representative, or completely remotely by proxy to our specialist.
The process of decorating crypto activity involves the following steps:
- Development of a business model of the company with an indication of the list of operations to be carried out.
- Selection and verification of a unique name for a crypto company, selection of a legal address
- Preparation of a notarized power of attorney for a representative of Lawrange JSC, if you plan to execute documents remotely.
- Registration of constituent documents and filling out registration forms.
- Collection of documentation for individuals involved in the activities of the company, in accordance with the requirements of the state. regulator.
- Registering a company and opening a bank account on it.
- Drafting and sending a notification (application) to FCIS for obtaining a special permission for crypto business. The processing time for such an application is on average one month.
*** Note: During licensing, the regulator may request additional information. In particular, we are talking about detailing the description of the activities of the crypto company. The decision to grant the applicant the appropriate permission is made only if all the conditions set are met and after consideration of the entire volume of the requested information.
Regulation of the activities of a cryptocurrency company in Lithuania
In order to prevent money laundering and financing of criminal purposes, the activities of a crypto company must comply with strict regulations. First of all, we are talking about the implementation of policies and procedures for internal control, risk assessment of the company’s activities based on the requirements of the regulator. It also provides for external control by the relevant authorized bodies.
Important! Among the main areas of internal and external control:
- Mandatory application of due diligence measures – identification and verification of all potential customers in accordance with AML / KYC rules, as well as verification of individual transactions of current customers in case of exceeding the established limit of 15,000 euros or an equivalent amount in another currency, or presence of other signaling criteria.
- Storing customer information with the ability to transfer to the regulatory authority upon request.
- Regular submission of reports to FCIS, as well as prompt provision of answers to current inquiries regarding the company’s activities.
- Financial monitoring and suspension of suspicious transactions.
- Introduction of the position of AML-specialist (Compliance Officer), who should be responsible for the implementation of the anti-money laundering policy. The appointment of a specific person to this position should be coordinated with FCIS.
- Regularly conducting a comprehensive audit of financial activities with timely identification of threats, risks and vulnerabilities.
- Submission of reports to the regulator and provision of information on individual requests.
Attention! Any change in the structure of a crypto company after receiving permission from FCIS (in particular, change of address, owner, board member, beneficiary, AML specialist) requires registration with the provision of a full package documents.
For your information! There are no special requirements for accounting and tax reporting in a cryptocurrency firm. Accounting should be kept according to the standards that are accepted for other companies in Lithuania.
Duties of the AML Specialist:
- participation in the preparation, implementation and maintenance of AML policies in the company;
- participation in the development of a risk assessment system for products and services, as well as customers;
- collection and evaluation of information about suspicious transactions, both with signs of money laundering and possible components of other fraud;
- keeping records of high-risk clients;
- regular interaction with the board of directors, financial authorities;
- communication with FCIS representatives, and submission of reports (reporting) to this regulator;
- filing notifications of suspicious activity with the regulatory authorities, in particular – in case of suspicion of money laundering;
- organizing training for the company’s personnel on measures to prevent money laundering, primarily those who work with clients.
Requirements for AML-specialist:
- residency in Lithuania;
- specialized education;
- professional experience and impeccable business reputation.
How should the client (natural or legal person) be identified and verified?
- clearly define: the client acts on his own behalf or represents the interests of another person (in the second case, this person should be identified);
- collect information about the ownership structure, business management, client goals;
- cross-check the personal data of the ultimate beneficiaries (UBO), directors, shareholders, board members from independent sources;
- explore the client’s business relationship;
- constantly review and update information and documents for clients with whom we have already established cooperation;
- not to cooperate or immediately terminate cooperation upon receipt of relevant information with the subjects:
– to which international sanctions are applied;
– who were previously suspected of laundering money obtained by criminal means and financing terrorism;
– who are politically exposed persons;
– who are residents of jurisdictions where proper AML measures are not applied.
When should customer identification be done?
- before establishing a business relationship;
- before carrying out random exchange or cryptocurrency transactions, if the amount is equivalent to or exceeds 1000 euros;
- when doubts arise about the accuracy or completeness of information previously obtained about the client or the recipient of funds;
- when there is any suspicion of a money laundering or terrorist financing operation or transaction.
Cost and timing of obtaining a crypto license in Lithuania
Important! Cooperation with the Lawrange law firm ensures the optimization of the timing of obtaining special permits for conducting cryptocurrency business in Lithuania. Self-registration of documents with a high probability can entail: in the best case – delaying the start of the crypto project, in the worst case – refusal to issue a permit due to mistakes made by the applicant.
At the same time, on average turnkey processing times for a crypto business in Lithuania are from 1 to 2 months (we are talking about going through all the stages from registering a company and opening an account to obtaining a license).
Cost of Lawrange JSC services:
obtaining one crypto license – from 9999 EUR;
obtaining two crypto licenses – from 14 999 EUR.
The price includes:
- preparation of documents and company registration;
- assistance in developing a business plan and business model for obtaining a license;
- preparation of all documents, forms and applications for obtaining a license;
- development of a general AML / KYC policy that meets the requirements of the regulator.
The price does not include (paid separately):
- search for a local resident for the position of AML-specialist (Compliance Officer) – from 1500 EUR / month;
- accounting services;
- assistance in opening a current account for a company – in a payment system (EMI) or in a bank – from 1000 EUR.
General AML / KYC Policy for Cryptocompany
In order to obtain special permission from the Financial Crime Investigation Service (FCIS) for the provision of services related to the exchange and storage of cryptocurrency, the applicant company must prepare: a) criteria for assessing the riskiness of clients and individual transactions; b) KYC (Know Your Customer) / AML (Anti-Money Laundering Criteria) documentation; c) procedural rules.
Procedural rules for security measures include:
- risk classification;
- an assessment of the level of risk;
- applying due diligence measures;
- control of the origin of funds and transactions;
- internal audit and fulfillment of obligations to notify the regulator about suspicious transactions.
Among the AML / KYC documentation:
- a description of high-risk transactions, including those related to communications and customer locations – establishing requirements and procedures for conducting and monitoring such transactions;
- a description of lower risk transactions – establishing requirements and procedures for them;
- procedure for storing data about deals and clients;
- regulatory requirements for reporting suspicious transactions or transactions to the regulator.
Registration of a crypto company in Lithuania
In connection with the latest legislative changes, Lithuania can be considered the most budgetary and affordable option for registering a crypto company among the countries of the European Union. If previously Estonia could be attributed to such options, now this is no longer true. Firstly, more money will have to be invested in registering a crypto business in Estonia (the requirements for the minimum authorized capital have increased). Secondly, the very organization of activities for such companies has become more complicated – there was a requirement for the mandatory transfer of the business management center to Estonia.
Important! Considering the prospects of doing crypto business in Europe, Lithuania can reasonably be considered an excellent option among jurisdictions for registering a company.
Advantages of Lithuania for running a crypto business:
- friendly attitude towards cryptoassets and related activities;
- understandable and clear conditions for obtaining special permissions (crypto licenses) for the provision of services related to the exchange and storage of cryptocurrencies;
- more flexible legislative regulation of cryptocurrencies in comparison with neighboring Estonia;
- the possibility of registering a company, issuing a corporate account and licensing remotely;
- acceptable corporate tax rate (15%) compared to other EU jurisdictions;
- the country has had the status of a fintech business center over the past few years;
- no residency requirements for directors and shareholders of the company;
- almost complete absence of bureaucratic costs when registering a business by a non-resident;
- relatively low costs, both for the registration of the company and for its maintenance in the future;
- creating prerequisites for entrepreneurs to start with crypto projects as quickly as possible, taking advantage of favorable market conditions.
Arguments “for” cooperation with Lawrange JSC
Thanks to ten years of experience in supporting international business projects and careful monitoring of legislative changes in the field of cryptocurrency regulation, the Lawrange team is able to become a highly effective assistant for registering a crypto business in Lithuania. We carry out a full range of necessary actions to authorize a crypto service provider – to exchange or store virtual currencies.
Our support provides for resolving the issue of registering a company in Lithuania and affiliated persons of this business entity. We undertake the preparation and further launch of the implementation of the AML and KYC policies and rules. At the request of the client, accounting support is provided, as well as other necessary services for the activities of the crypto company. All steps are carried out remotely until the result is obtained.