On-shore VASP in Latvia
Locally-incorporated VASP that operates under full local jurisdiction, holding all required licenses and registrations.
On-shore VASP is conditionally permitted in Latvia with a local entity, subject to AML obligations and medium licensing burden.
Verdict Details
- Permitted
- conditional
- Local entity required
- Yes
- Licensing burden
- Medium
- Last updated
- 2026-07-13
AML Obligations
- Register with the Financial Intelligence Unit (FIU) of Latvia (FID) as a VASP under the AML/CTPF Law (Nozagoto noziedzīgi iegūtu līdzekļu legalizācijas un terorisma finansēšanas novēršanas likums)
- Establish a comprehensive AML/CTPF Internal Control System (ICS) including: risk assessment, Client Due Diligence (CDD) and Enhanced Due Diligence (EDD) procedures, transaction monitoring systems, suspicious transaction reporting procedures, record-keeping (minimum 5 years), and regular employee AML/CTPF training
- Appoint a board member or employee as the designated AML Officer who reports directly to the board
- Conduct fitness and propriety checks on management and beneficial owners
- Report suspicious transactions to the FIU
- Post-MiCA (from 30 December 2024): Transition to full CASP authorization from the Bank of Latvia (Latvijas Banka), with prudential safeguards (capital requirements), specific rules on safekeeping (segregation) of client crypto-assets, IT/security arrangements, and suitability requirements for management and shareholders
- Adhere to DAC8 reporting obligations (upcoming) for reporting EU client crypto-asset information to tax authorities
Key Restrictions
- Entity must be registered in Latvia as a legal entity (typically a Limited Liability Company – SIA) with a registered office in Latvia
- Under current (pre-MiCA) regime, registration is AML/CTPF-focused — no full prudential licensing regime applies until MiCA takes effect (30 Dec 2024)
- No explicit legislative mandate for segregation of client crypto assets under current regime, though MiCA will mandate strict segregation post-December 2024
- No explicit insurance/bonding requirements for custodial VASPs currently, but FID expects robust risk management
- Bank of Latvia (FCMC) oversees traditional financial institutions and may have overlapping jurisdiction if services touch regulated financial activities
Key Risks
- Regulatory transition risk: Latvia is moving from a lighter AML registration regime (pre-MiCA) to a full MiCA licensing regime (post-December 2024), creating uncertainty for operators during the transition
- Enforcement precedent is limited — publicly reported large fines against pure crypto businesses are scarce, creating ambiguity about penalty severity
- Language barrier: key regulatory guidance is primarily in Latvian, increasing compliance risk for non-Latvian-speaking operators
- No explicit current rules on client asset segregation or cold storage expectations, but MiCA will impose strict requirements — firms must plan for the transition
- Tax complexity: Latvia's deferred corporate income tax system (tax on distributed profits only) creates unusual book-tax timing considerations for crypto businesses
Evidence
This verdict synthesizes the following facts. Each fact links to its primary source(s).
Financial Intelligence Unit (FIU) of Latvia (Finanšu izlūkošanas dienests - FID): The primary authority responsible for registering and supervising VASPs for AML/CTPF compliance.
Current Regime (Pre-MiCA): Registration. Latvia requires entities engaged in virtual asset services to register with the FIU. This registration is primarily an AML/CTPF compliance obligation, meaning the focus is on preventing money laundering and terrorist financing, rather than prudential supervision (e.g., capital adequacy for consumer protection, market integrity, etc., which is typical of a full licensing regime).
Future Regime (Post-MiCA): Licensing. Once MiCA fully applies to VASPs (expected December 2024), Latvia will transition to a comprehensive licensing regime under MiCA. This will involve more stringent requirements, including prudential safeguards, operational resilience, and specific disclosures, and will likely be overseen by the Bank of Latvia (FCMC).
The applicant must be a legal entity registered in Latvia (typically a Limited Liability Company – SIA).
The company must have its registered office in Latvia.
AML/CTPF Internal Control System (ICS):
Client Due Diligence (CDD) and Enhanced Due Diligence (EDD): Procedures for identifying and verifying clients, beneficial owners, and monitoring business relationships.
Transaction Monitoring: Systems for monitoring transactions for suspicious activities.
Reporting: Procedures for reporting suspicious transactions to the FIU.
Record-keeping: Maintaining records for a specified period (typically 5 years).
Training: Regular AML/CTPF training for employees.
Appointed AML Officer:
Exchanges (Virtual Asset Exchange Service Providers):
Custody Providers (Virtual Asset Wallet Service Providers):
Requirement: Entities providing services of custodial wallet providers (which includes safekeeping or administration of virtual assets or instruments enabling control over virtual assets on behalf of clients) are considered Virtual Asset Service Providers (VASPs). They are required to register with the Latvian Financial Intelligence Unit (FID).
Ensuring the fitness and propriety of management and beneficial owners.
Law on the Prevention of Money Laundering and Terrorism Financing (AML/CFT Law) (Nozagoto noziedzīgi iegūtu līdzekļu legalizācijas un terorisma finansēšanas novēršanas likums): This is the primary law regulating AML/CFT, which also covers sanctions compliance for obligated entities, including VASPs.
Requirement: Under MiCA, providing "custody and administration of crypto-assets on behalf of clients" will require a full authorization (license) from the competent authority in the home Member State – in Latvia, this will be the Bank of Latvia (Latvijas Banka).
Authorization Process: CASPs will need to meet stringent requirements, including:
Mandate: MiCA explicitly mandates strict segregation of client crypto-assets.
Regulation (EU) 2023/1114 on Markets in Crypto-Assets (MiCA):
DAC8 (Upcoming): As an EU member state, Latvia will be implementing the EU's Directive on Administrative Cooperation in the Field of Taxation (DAC8). This directive will mandate crypto-asset service providers to report information on EU clients and their crypto-asset transactions to tax authorities, which will then be automatically exchanged between EU member states. This will significantly increase the data available to tax authorities regarding crypto activities.
Corporate Income Tax Return (UIN deklarācija): Companies must submit their annual corporate income tax return electronically via the EDS by May 20th of the year following the tax year. They must report all income and expenses, including those related to virtual assets.
Penalty Amount: Varies depending on the severity of the violation, ranging from warnings and administrative measures to significant fines. However, publicly reported large fines against pure crypto businesses are scarce. Outcome: Remedial actions required, potential fines, or in severe cases, withdrawal of registration/license.
Verdict Attribution
- Source:
- AI-Generated · Unreviewed
- AI synthesized:
- 2026-07-13 (deepseek-chat)
- Last updated:
- 2026-07-13
- Confidence:
- high
This verdict was produced by an AI model from the underlying facts. Confirm with counsel before relying on it for material decisions.
Conditional — a locally-incorporated on-shore VASP may operate in Latvia by registering with the FIU under the current AML/CTPF regime (medium burden), with a mandatory transition to full MiCA licensing under the Bank of Latvia from December 2024, requiring a local entity, an AML officer, a robust ICS, and CDD/EDD/transaction monitoring obligations.
Questions this verdict aims to answer
- What license(s) are required to operate locally?
- What capital, governance, and reporting obligations apply?
- What is the application process and timeline?