Crypto-funded debit card in Lithuania

Key Regulator: The Financial Crime Investigation Service (FCIS) is the main supervisory body for virtual currency exchange operators and custodian virtual currency wallet operators.

Bank of Lithuania (BoL): Supervises traditional financial institutions (including EMIs and PIs) and provides general guidance on financial innovation, but does not directly license crypto-native activities without fiat components.

Virtual Currency Exchange Operator:

Definition: Any natural or legal person that provides services of exchanging virtual currency to fiat currency or vice versa, or virtual currency to another virtual currency, or transfers virtual currencies. This covers most common crypto exchanges.

Fiat-to-Crypto / Crypto-to-Fiat Payment Processors (or traditional payment services using crypto): If the payment processor handles fiat currency (e.g., accepting fiat payments for crypto, converting crypto back to fiat and paying out to bank accounts, or issuing electronic money backed by fiat), then they would likely need a separate license from the Bank of Lithuania as either:

Electronic Money Institution (EMI) License: Allows issuing electronic money and providing related payment services.

Payment Institution (PI) License: Allows providing various payment services (e.g., money remittance, payment initiation, account information services).

Registration Regime (FCIS): For virtual currency exchange and custodian wallet operators, Lithuania operates a registration model. This means that once an applicant meets the specified criteria (primarily AML/CTF related) and submits the required documentation, they are registered and allowed to operate. It is generally a less intensive process than obtaining a full financial services license.

Licensing Regime (Bank of Lithuania): For Electronic Money Institutions (EMIs) and Payment Institutions (PIs), a full licensing regime is in place, involving comprehensive assessment of business plans, financial soundness, risk management, governance, and fit & proper checks, with ongoing prudential supervision.

Legal Entity: The applicant must be a legal entity (e.g., UAB – private limited liability company) incorporated in Lithuania.

A minimum €125,000 registered share capital is required for both virtual currency exchange operators and custodian virtual currency wallet operators. This requirement was significantly increased in November 2022 from a previous €2,500.

AML/KYC Requirements: Robust internal procedures are paramount:

Internal AML/CTF Rules: Comprehensive written policies and procedures aligned with Lithuanian AML Law and EU directives.

Risk Assessment: A documented assessment of money laundering and terrorist financing risks specific to the business model.

Customer Due Diligence (CDD): Procedures for identifying and verifying customers (individuals and legal entities), beneficial owners (UBOs), and understanding the purpose and nature of business relationships. This includes ongoing monitoring.

Enhanced Due Diligence (EDD): For high-risk customers, politically exposed persons (PEPs), or complex/unusual transactions.

Transaction Monitoring: Systems and procedures to monitor transactions for suspicious activities.

Reporting: Obligation to report suspicious transactions and activities (SARs) to the FCIS.

Record Keeping: Maintaining records of customer identification data and transactions for at least 8 years.

Registered Office: Must have a registered office in Lithuania.

AML Officer (MLRO): A dedicated, qualified Anti-Money Laundering Officer (MLRO) must be appointed. This individual must be a permanent resident of Lithuania. They are responsible for implementing AML/CTF procedures, training staff, and reporting to the FCIS.

E-money Tokens (EMTs): These are crypto-assets that purport to maintain a stable value by referencing the value of one single official currency (e.g., a Euro-backed stablecoin).

Classification: EMTs are classified as electronic money under the Electronic Money Directive 2009/110/EC (EMD2), with additional specific requirements imposed by MiCA.

Must be backed 1:1 by fiat currency (e.g., Euros).

Funds received in exchange for EMTs must be placed in a separate account at a credit institution or invested in secure, low-risk assets.

Issuers must hold at least 30% of the reserve assets in deposits at credit institutions. The remaining part can be invested in highly liquid, low-risk financial instruments with minimal market risk.

Assets must be segregated from the issuer's own assets and held in custody by an independent third party (credit institution).

Sell cryptocurrency for fiat currency.

Use cryptocurrency to purchase goods or services.

Taxable Event: A taxable event occurs when you:

15% PIT rate applies to taxable income up to a certain threshold. For 2024, this threshold is €120,408 (120 average national wages).

20% PIT rate applies to taxable income exceeding this threshold (€120,408 for 2024).