Lithuanian Cryptocurrency Regulatory Update: MiCA Compliance Brings Fresh Prospects for Digital Assets
Lithuania is taking a decisive step towards regulating the crypto sector, aligning its regulations with the EU's Markets in Crypto-Assets (MiCA) regulation. This move aims to create a unified, transparent, and investor-friendly environment for crypto activities within the country and across the EU.
Starting in 2026, all crypto asset service providers (CASPs) operating in Lithuania will be required to obtain a license to operate legally. The Bank of Lithuania, acting as the primary regulatory and supervisory authority, will issue these licenses, ensuring compliance, and urging unlicensed crypto firms to wind down operations before the 2025 deadline to protect investors and maintain market transparency.
The Bank also provides guidance on orderly client exit procedures, including fund transfers and crypto-to-fiat conversions.
The Ministry of Finance plays a crucial role in shaping legislation, participating in setting AML/KYC, investor protection, and technical standards for crypto service providers within the national legal framework aligned to EU directives. The Ministry oversees legislative aspects, including passing amendments extending transition periods for compliance with MiCA.
Ensuring AML/CFT compliance falls under the purview of the Financial Crime Investigation Service (FCIS). Lithuania applies AML laws to crypto asset activities, requiring strict reporting and KYC measures. The FCIS focuses on preventing money laundering and terrorist financing through oversight of crypto transactions and licensing compliance consistent with EU AML directives.
Consumer protection measures, such as asset segregation and transparency, must be implemented. The Transfer of Funds (TFR) Regulation was adopted in Lithuania to implement the Travel Rule related to virtual assets, requiring CASPs to collect data on the originator and beneficiary of transfers, verify this information, and share it with counterparties for transactions exceeding EUR 1,000.
Crypto-Asset Service Providers (CASPs) are categorized into three classes based on the type of services they provide and their corresponding minimum capital requirements. To obtain a license as a CASPs in Lithuania, companies must meet specific financial requirements, with a minimum equity capital of EUR 125,000 as of April 2024.
Licensed CASPs in Lithuania are required to submit annual audited financial statements and provide regular updates on transaction volumes and customer activity. Incident response procedures must be established for handling security breaches or compliance violations. Real-time systems must be implemented for transaction monitoring by licensed CASPs.
Ongoing Due Diligence must be conducted for AML and KYC processes. Enhanced Due Diligence (EDD) must be applied for high-risk customers. Issuers of other crypto assets, other than asset-referenced tokens or electronic money tokens, must be legal entities established in the EU and are required to draft a crypto-asset white paper. A compliance officer must be appointed to oversee adherence to all regulatory requirements.
Lithuania's regulatory approach is highly EU-oriented, implementing MiCA as a harmonization tool for transparency, authorization, and investor protection across member states. MiCA introduces a set of rules applicable across all EU member states, ensuring market integrity and investor protection.
MiCA harmonizes regulations across the EU, offering a favorable environment for crypto businesses in Lithuania, allowing them to access the entire EU market of over 450 million people under a single set of rules. The new regime replaces a previously unregulated "wild west" crypto market by mandating licenses for all relevant companies.
Lithuania prohibits crypto gambling and has specific tax regulations that include a non-taxable capital gains threshold of €2,500 for cryptocurrency sales, with a 15% tax on gains above this limit.
The crypto market in Lithuania is projected to grow at a rate of 4.73% from 2024 to 2028, reaching an estimated revenue of $31.64 million by 2028. Partnering with professional verification providers can streamline compliance efforts for CASPs in Lithuania.
Compliance with the EU's General Data Protection Regulation (GDPR) is required for data protection. Lithuania's crypto assets regulations include MiCA, TFR, and Law on Prevention of Money Laundering and Terrorist Financing.
Suspicious Activity Reports (SARs) must be submitted to the Financial Crime Investigation Service (FCIS) within 24 hours of detecting suspicious activities (Suspicious Activity Reporting). A risk-based approach should be adopted for transaction monitoring by licensed CASPs.
In summary, Lithuania enforces a stringent, MiCA-compliant crypto regulatory framework led by the Bank of Lithuania for licensing and supervision, supported by the Ministry of Finance's legislative role and the Financial Crime Investigation Service’s enforcement of AML requirements to ensure legal, transparent, and investor-protective crypto activities. The transition period ending in late 2025 marks a hard enforcement point after which only licensed providers may legally operate.
- The Bank of Lithuania will issue licenses to all crypto asset service providers (CASPs) operating in the country, starting in 2026, as part of the administration's efforts to create a unified, transparent, and investor-friendly environment for crypto activities.
- In compliance with the Transfer of Funds (TFR) Regulation adopted in Lithuania, crypto asset service providers (CASPs) are required to collect data on the originator and beneficiary of transfers, verify this information, and share it with counterparties for transactions exceeding EUR 1,000 to maintain market transparency.
- Lithuania's regulatory approach to cryptocurrencies is highly EU-oriented, as it implements the MiCA regulation as a harmonization tool for transparency, authorization, and investor protection across member states, offering a favorable environment for crypto businesses in Lithuania and allowing them to access the entire EU market.
