Lithuania Crypto Exchange License
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The Baltic State of Lithuania has established itself as one of the most crypto-friendly nations in Europe. It has favourable regulations and taxation, and is the base for a number of new blockchain and crypto start-ups.
In 2017, the Bank of Lithuania established ICO (Initial Coin Offering) regulations and thereafter STO regulations in 2019. This made them one of the earliest countries in Europe to have a comprehensive legal framework for the cryptocurrency market. They have been advocating cohesive digital asset regulation for the entire European Union and have already launched their own digital currency, LBCoin.
Table of Contents:
- Advantages Of A Lithuania Cryptocurrency License
- Details For Lithuania Cryptocurrency License
- Types Of Cryptocurrency Licenses In Lithuania
- Cryptocurrency Exchange License
- Cryptocurrency Wallet And Custodian Services License
- Requirements For Companies Engaging In Crypto-Related Activities
- Additional Information On Lithuania Crypto Licenses
- Documents Required For Starting A Cryptocurrency Exchange
- Cryptocurrency License Application Process
- Taxation Of Cryptocurrency Companies In Lithuania
Advantages of a Lithuania Cryptocurrency License
The advantages of obtaining a crypto license in Lithuania include:
- Lithuania is at the forefront of cryptocurrency adoption and fair regulation in Europe.
- The process for acquiring the license and registering a company is simple without the burden of unnecessary beaurocracy.
- Minimal requirements for setting up a cryptocurrency company which include:
- A minimum share capital of only EUR 2,500.
- No capital requirements for qualifying for a crypto license.
- Low cost which only involves paying for the company registration and the preparation and submission of the necessary documents.
- No physical presence or citizenship requirements for members, director, etc. There is also no requirement to hire local staff members.
- Low corporate tax rate of 15% for cryptocurrency companies.
- Company and license can be registered remotely with no requirement to have an interview with the Lithuanian regulatory authorities.
Details for Lithuania Cryptocurrency License
Types of Cryptocurrency Licenses in Lithuania
There are two main types of crypto licenses for operations involving virtual currencies in Lithuania:
Cryptocurrency exchange license
A company holding a cryptocurrency exchange license in Lithuania is allowed to exchange digital currencies for fiat currency and vice versa. They may also exchange one cryptocurrency for another one. They may charge a commission for these services when performed on behalf of their customers.
Cryptocurrency wallet and custodian services license
A company holding the wallet and custodian services license is allowed to operate customer wallets to store cryptocurrency. This may include generating and storing encrypted private keys for the client.
Companies may hold either or both the aforementioned licenses for crypto-related activities. The Lithuanian Financial Crime Investigation Services (FCIS) are in charge of granting and controlling these crypto licenses.
Deciding which of these licenses to apply for obviously depends on the type of crypto activities your company is engaged in or plans to include in the future.
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Requirements for Companies Engaging in Crypto-Related Activities
Lithuanian companies who wish to participate in the cryptocurrency sector and provide related services are subject to the following requirements:
- To be eligible to apply for a cryptocurrency license so as to provide cryptocurrency exchange and/or crypto custodian services, a limited liability company (UAB) must be incorporated in Lithuania.
- The minimum authorised capital required is EUR 2,500.
- The company may be established either in person or remotely, but all required processes and document submission must be adhered to.
- There must be at least one owner, one board member, and one AML compliance officer. These three posts may be held by the same individual or different persons.
- The company must have a verified address in Lithuania.
- Clients must go through full background checks and Know Your Customer (KYC) processes. This data must be kept in case it is needed by the relevant authorities.
- The company must have effective internal control and risk management procedures.
- The company must report any suspicious activity or transactions to the FCIS.
Additional Information on Lithuania Crypto Licenses
The FCIS has set out additional provisions related to cryptocurrency license application procedures and operation as a cryptocurrency custodian and/or exchange. In particular:
- The FCIS has the right to request any additional information during the licensing process, including further details about the intended crypto-related activities of the company.
- The company is not guaranteed to be successful in their application for a crypto license. The license is only provided after all the documentation requirements have been fulfilled and the information is deemed to be complete and sufficient.
- Any later changes in the company structure which were originally detailed in the crypto license application (e.g., company address, details about board members, AML officer, ownership, etc.) must be filed with the local registrar.
- In addition to the regulation set forth by the FCIS on cryptocurrency operations, crypto companies are also regulated by the Law on the Prevention of Money Laundering and Financing of Terrorism, specifically Order No V-5 of January 2020.
- Cryptocurrency companies do not have any special additional reporting requirements. Annual reporting of accounts and finances is completed according to the same requirements of an ordinary Lithuanian company.
- Cryptocurrency companies must maintain required AML/KYC data of their clients. This information must be kept on record and is only required for filing to the regulator if requested.
Documents Required for Starting a Cryptocurrency Exchange
The following documents and information are needed to apply for a cryptocurrency exchange license and start a crypto exchange in Lithuania:
- Valid and certified passport copy of owners,
- The company’s business model and/or a detailed description of proposed activities,
- CV/experience and training of owners in the relevant field of crypto,
- Information about the board members including their reputation and good-standing,
- Certificates proving clean criminal records of owners, directors, beneficiaries, and AML officers.
- Power of attorney if the process of incorporating the company and applying for the license will occur remotely.
Cryptocurrency License Application Process
The application process for either of the two types of crypto licenses in Lithuania must be done through a registered company in Lithuania, or in the case of a foreign company, through a registered branch in Lithuania.
The steps for obtaining the license (beginning with registering the actual company in Lithuania) are as follows:
- Prepare all necessary documents for registering a company in Lithuania. The preferred vehicle is a Lithuanian Limited Liability Company (UAB).
- Complete the process for registering a company. This is straightforward and usually takes about 5 business days to complete.
- Ensure that the company is in a state ready for the license application. This includes fulfilling all the necessary requirements of a licensed crypto company discussed previously (correct internal policies and security measures, reporting requirements, AML officer, etc.). In addition, the company must prepare all the documents needed for the license application.
- Once the company is registered and in alignment with all the requirements set forth for obtaining a crypto license, it can proceed with the application for a cryptocurrency license to the FCIS. The choice of license/s that the company applies for is up to them and depends on their own needs and objectives.
- Once the application has been submitted along with all the necessary supporting documents, the application is processed by the FCIS. The processing time takes a maximum of 20 business days from the date that the application is submitted. If approved, the company will be issued with a registered license.
Taxation of Cryptocurrency Companies in Lithuania
The taxation of cryptocurrency companies in Lithuania is similar to that of ordinary companies registered in Lithuania. Some key points to note are:
- Cryptocurrency exchange services are not liable for VAT; however,
- Services that are provided and accounts that are paid in cryptocurrencies are subject to normal VAT.
- As with ordinary UAB’s in Lithuania, a cryptocurrency company must pay a corporate tax rate of 15% on profits. A “micro company” with under 10 employees with a gross annual income of EUR 300,000 is taxed at a reduced corporate tax rate of between 0% and 5%.
- There is an income tax of 15% charged on distributed profits such as dividends payouts.