Lithuania
Current Economic Situation in Lithuania Source: Pinterest Lithuania, with a population of around 2.8 million, has become one of the fastest-growing economies in the Baltics, showing resilience amid global economic uncertainties. Due to high inflation, trade disruptions, and weakened confidence, real GDP contracted in 2023. This economic contraction was primarily fueled by a decline in private consumption over two consecutive quarters and a consistent drop in real goods exports throughout the year. Currently, in 2024, easing inflation and steady growth in nominal wages are expected to bolster private consumption as real incomes improve. According to the European Union, Lithuania’s real GDP is projected to grow by 2% in 2024, driven by a strong rise in private consumption, sustained investment growth, and a gradual rebound in trade. Looking ahead to 2025, real GDP growth is forecasted to accelerate to 2.9% as the EU and eurozone economies gain momentum and trade activity intensifies. Overall, the Lithuanian economy is set to return to growth in 2024, fueled by a recovery in consumption and a gradual strengthening of EU and global economic conditions. Gediminas Šimkus, Chairman of the Board of Lietuvos Bankas (Bank of Lithuania), remarked that while it is encouraging to see the Lithuanian economy finally returning to growth, autumn is a perfect time to assess their progress and prepare for accelerated economic growth. Crypto Law in Lithuania Source: Pinterest Lithuania has positioned itself as a forward-thinking hub for cryptocurrency innovation, aligning its regulatory framework with the European Union’s Markets in Crypto-Assets (MiCA) guidelines. Recently, the Lithuanian government introduced significant legislative updates to foster a sustainable crypto sector while prioritizing consumer protection and financial stability. On June 8, 2022, the Lithuanian Seimas (Parliament) approved amendments to the Law on the Prevention of Money Laundering and Terrorist Financing, tightening regulations for crypto-asset service providers (CASPs). These regulations are set to fully take effect in December 2024, with a transitional period extending until June 2025 to allow businesses time to adapt. The key regulatory updates to expect from these changes include: Minimum Capital Requirement Crypto asset service providers (CASPs) are now required to maintain a minimum equity capital of €125,000. This new threshold raises the entry barrier for smaller companies, ensuring that only well-capitalized businesses participate in the market. Capital Deposits in Lithuanian Banks CASPs must deposit their authorized capital in a Lithuanian financial institution. This requirement allows for greater financial oversight and control by local regulators, adding an extra layer of security. Stricter Sanctions and Enforcement The Financial Crimes Investigation Service (FCIS) will rigorously enforce these regulations, with severe penalties for non-compliance. This commitment underlines Lithuania’s dedication to a compliant and transparent crypto environment. Crypto asset service providers in Lithuania intending to continue operations are now required to secure an operating license from the Bank of Lithuania. Under recent legal amendments, the Bank of Lithuania is tasked with the supervision of these providers to ensure compliance with regulatory standards. Enhanced Compliance Measures: KYC and Transaction Monitoring To further safeguard the sector, Lithuania’s new Anti-Money Laundering (AML) framework introduces robust Know Your Customer (KYC) and transaction monitoring protocols. CASPs must now implement real-time transaction monitoring and continuous client identity verification, especially for transactions above certain thresholds. These measures aim to mitigate the risk of money laundering and ensure a safer, more transparent marketplace for investors. Additionally, the Bank of Lithuania and the Financial Crimes Investigation Service (FNTT) are designated as the key institutions responsible for overseeing anti-money laundering (AML) and counter-terrorist financing (CTF) efforts within the crypto sector. Preparing for Enhanced Oversight from the FCIS As regulatory measures strengthen, the FCIS is expected to increase its inspections, ensuring strict adherence to AML and MiCA standards. CASPs should prepare for thorough regulatory reviews, focusing on: With these rigorous regulatory standards, Lithuania is positioning itself as a leader in cryptocurrency regulation, providing a robust, compliant environment for crypto businesses to thrive while ensuring financial stability and consumer protection. MiCA Alignment: Lithuania’s Proactive Stance While Markets in Crypto-Assets (MiCA) permits a transitional period for EU countries, Lithuania is fast-tracking these regulations by bypassing the grace period entirely. This early adoption of MiCA standards positions Lithuania as a regulatory pioneer in the crypto space. The reasons for skipping the MiCA transition period include: First-Mover Advantage Enforcing MiCA regulations ahead of other EU nations solidifies Lithuania as a destination for businesses seeking regulatory stability, giving it a competitive edge. Transparency and Trust Early MiCA alignment offers businesses a clear legal framework, fostering greater investor confidence and attracting new businesses to Lithuania. Market Integrity Proactively adopting MiCA demonstrates Lithuania’s commitment to consumer protection and market integrity, reinforcing trust in the local crypto ecosystem. Types of Crypto Licenses and Regulatory Requirements Source: Pinterest Lithuania offers two primary licenses for businesses in the cryptocurrency sector: Exchange Service Provider License This license allows companies to operate cryptocurrency exchange services legally. It enables businesses to conduct activities such as exchanging one cryptocurrency for another, converting fiat money to cryptocurrency, and managing crypto wallets. With this license, companies can provide cryptocurrency exchange services and charge commissions. Crypto Wallet and Custodian Services License This license permits businesses to create and manage encrypted keys for clients, ensuring secure storage and transfer of cryptocurrencies. It authorizes companies to facilitate the transfer of crypto assets between individuals. Required Documents for License Application: Note that while the Bank of Lithuania is responsible for reviewing license applications, the Financial Crime Investigation Service (FCIS) regulates the licensed activities. This helps ensure compliance with financial crime prevention and AML/CTF standards. Lithuania Crypto Taxation Policies Lithuania currently ranks sixth in the international competitiveness index for taxation, reflecting a low tax burden on business investments and a neutral approach supported by a well-structured tax code. Although national authorities have not introduced crypto-specific taxes, conventional tax regulations apply to crypto-related activities such as mining, initial offerings, buying and selling, brokerage, and using cryptocurrencies to pay for products or services. The applicable tax rates vary based on the type of virtual currency, the nature of activities, types