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14-03-2024

The Ministry of Finance: more detailed regulation of the crypto market will increase the transparency of the sector

The Ministry of Finance, together with the Bank of Lithuania, has prepared and submitted for re-coordination with other institutions several draft amendments to the laws, which will establish new operational requirements for crypto-asset service providers and consolidate their licensing process.

"The proposals that have been prepared will essentially bring crypto-asset service companies closer to the operating standards applied to financial institutions and will ensure better protection of financial service users. Moreover, as compared to the initial proposal, crypto-asset service providers are given more time to adapt to the new requirements of the MiCA and TFR regulations", says Vice-Minister of Finance Vaida Česnulevičiūtė - Markevičienė. 

When implementing the European markets in crypto-assets (MiCA) and transfer of funds (TFR) regulations, it is necessary to change the supervision and registration model of virtual currency exchange operators and depository virtual currency wallet operatorscurrently defined in the Lithuanian legal system. The MiCA Regulation aims to establish uniform operational requirements for crypto-asset service providers across the EU, encouraging innovation while maintaining financial stability and protecting consumers from potential risks.

The draft amendments also propose to apply exceptions to fund transfers in the territory of Lithuania, when making payments for the supply of goods or the provision of services, if the stipulated conditions of the TFR regulation are fulfilled, thus creating favourable operating conditions for e-commerce platforms operating in Lithuania.

The MiCA regulation is to be applied from 30 December 2024, but an optional transitional period (until 1 July 2026) is planned for crypto-asset service providers to adapt to the new requirements. The proposed package of legislative changes provides for a transitional period until 1 June 2025, which is necessary for preparation and obtaining licenses in order to continue operating in accordance with the new regulation.

The proposal for a transitional period is based on listening to the arguments of market participants and the fact that crypto-asset service providers will have to adapt their activities to the new regulation.

Until 1 June 2025, virtual currency operators intending to provide crypto-asset services will be required to submit the documents, data and information specified in the MiCA regulation to the Bank of Lithuania and obtain an operating license. Until then, crypto market participants will be able to consult with the supervisory authority on issues of the new regulation and submit documents for obtaining a license before the scheduled time.

"The amendments to the laws that increase regulatory clarity will create prerequisites for the sustainable development of the crypto-asset sector. This will be a kind of clarification of the market: it should not be difficult for those financial technology companies that adhere to a sustainable business model to adapt", says the Vice-Minister.

The implementation of the provisions of the MiCA and TFR regulations will increase the legal certainty of crypto-asset service providers' activities and provide supervisory authorities with the appropriate powers and tools to exercise supervision and better manage risks.

The amendments to the laws provide that the Bank of Lithuania will be responsible for the supervision of crypto-asset service providers. The institutions responsible for monitoring the prevention of money laundering and terrorist financing of crypto-asset service providers are the Bank of Lithuania and the Financial Crime Investigation Service (FNTT).

The draft laws are submitted for coordination with the institutions, comments are expected until 28 March.