Crypto license in Lithuania 2022

Crypto license in Lithuania 2022
  1. Lithuania is one of the few countries that are members of the European Union, where legal financial transactions with cryptocurrency are possible. In this country, the Financial Crime Investigation Service (FCIS) is engaged in the control of the cryptocurrency business. Lithuania provides a friendly and legally controlled environment for companies that present their virtual currency exchange and cryptocurrency wallet services, with precise and transparent conditions prescribed in the AML Act. An interested entrepreneur, especially when it comes to a new business, can also pay attention to the purchase of a ready-made crypto license in Lithuania for working with crypto assets. This option allows you to start managing the structure from the first days.

Types of Cryptocurrency Licenses in Lithuania

  1. The first type allows to provide the exchange of virtual currencies. Having such a license, a company can exchange digital currency for FIAT or vice versa, or one cryptocurrency for another, while the company receives a commission for the service provided (crypto exchanger activity). This license can also be used for crypto exchange services (crypto trading platforms, P2P trading facilities)
  2. The second type is related to the license for crypto wallet and custodian services. With this permission, the firm can manage the consumer’s wallet to save virtual currency, as well as generate and store encrypted private keys

Requirements for Crypto License Applicants

In order to avoid the legalization of income received by criminal means, the work of cryptocurrency firms is under the control of certain legal bodies. All employees, especially members of management, entrepreneurs, must have clean criminal record and impeccable reputation.

The main requirements for an applicant for a crypto license in Lithuania are:

  1. Presence of at least one owner (individual or legal entity). Can be non resident.
  2. Presence of at least one manager (may be the owner). If 2 or more managers are appointed, it is needed to form a management board. Board members can be non residents
  3. Officer for monitoring compliance with AML requirements (AML/Compliance officer). Must be a resident of Lithuania
  4. There must be a legal address of the company in Lithuania.
  5. Clients are required to undergo a background check and identification procedure.
  6. Materials of customers must be kept available to the regulator.
  7. Internal control operations and risk assessment should be carried out.
  8. Providing all information to regulators (Financial Crime Investigation Service).
  9. Permission at the legislative level for the owners or managers of the company to stay outside Lithuania for personal cooperation with foreign clients of cryptocurrency activities.

Separately, it should be noted that the option to buy a ready-made cryptocurrency license would be much more expedient and profitable in terms of saving time and efforts, as the whole structure will be ready to start crypto operations.

Procedure of obtaining a cryptocurrency license in Lithuania

To obtain a crypto license in Lithuania, it is necessary to establish a company in Lithuania. Foreign companies can establish a subsidiary in Lithuania and apply for crypto license. Today, the most common business organization in Lithuania is a limited liability organization (UAB). The minimum share capital is 2500 euros, divided into shares.

A cryptocurrency company can be created Lithuania without visiting the country, fully remotely. Personal visit will not be needed in any stage on setting up an entity, opening a bank account and obtaining crypto license, as we can arrange a whole process by power of attorney.

UAB must have at least one owner (individual or legal entity), one director (individual) and legal address in Lithuania. Plus, in a crypto company, it is necessary to have an employee to combat financial fraud and terrorism. He/she must be well trained and have professional skills, and residence in Lithuania is necessary.

If, after obtaining a license, there is a change in any structure of a cryptocurrency company (address, owner, board member, beneficiary, AML employee), then it is necessary to register all changes in the registry with the provision of all necessary information. The Bank of Lithuania handles license applications, the process is controlled by FCIS and issued by the Commercial Register. FCIS is a separate independent organization, which is a structural subdivision of the Lithuanian Police and Border Police Department. Order No. V-5 of January 2020 controls the operation of cryptocurrency firms and prevents financial terrorism.

Process of obtaining a cryptocurrency license in Lithuania

  1. First, you need to prepare all the necessary documents for the purchase/registration of a company.
  2. Purchase/registration of the company itself (approximately 5 business days).
  3. You need to appoint a compliant AML officer. When non residents can be the owners and board members of crypto company in Lithuania, Compliance officer has to be a resident of Lithuania and have access to the government resources for interaction with state bodies and reporting to FCIS.
  4. Next, the company itself is adjusted to the application for the license incl. completion of drafting AML rules (up to approximately 7 working days).
  5. As soon as the company is registered and all documents are ready, you can immediately submit a request to issue a license for virtual currency.
  6. This request, in turn, is considered by the FCIS within 20 working days from the date of submission of the request. Buying a license significantly reduces the amount of time allotted for starting a business, since you can avoid many nuances that are unnecessary from the point of view of the management of a commercial structure.

Documents for Obtaining a Crypto License in Lithuania

To apply for a cryptocurrency permission, the following documents are required:

  • a real copy of the passport from the place of residence;
  • power of attorney (PoA) (in case of remote registration);
  • detailed description of the company’s activities and its model;
  • resumes of all employees;
  • the address of the website that will advertise and provide cryptocurrency services;
  • certificate of criminal record (no more than 3 months) for all employees;
  • individual details of all beneficial owners (UBOs).

Throughout the process of obtaining a license, it is within the right of the regulator to request access to all information related to the activities of a cryptocurrency firm. Only after checking all the necessary information and after fulfilling all the conditions, a license can be issued.

Risk Evaluation, KYC/AML Documents and Rules of Procedure

Before applying for a crypto authorization in Lithuania, you need to prepare all the necessary documents about the internal processes of the company, which must meet the anti-fraud (AML) and KYC criteria set by FCIS:

  1. Internal security measures and hazard analysis.
  2. Analysis and control of the risk of money laundering and financial fraud.
  3. Calculation of risk percentages.
  4. Identification of the level of risks.
  5. Transaction regulation processes.
  6. Origin of funds.
  7. Compliance monitoring and internal audit.
  8. Necessary control measures.
  9. Notification Obligations.
  10. Submission and preservation of documents on cooperation between the company and clients.
  11. Compliance with the requirements of the regulator.
  12. Rules of internal control of the company.
  13. Description of transactions with a lower percentage of risk and the definition of rules for such procedures.
  14. Analysis of transactions with a high percentage of risk associated with the location of the customer or with the option of communication with him/her. Establish certain rules for monitoring operations.
  15. Rules of due diligence.
  16. Analysis of the customer and his documents.
  17. Address of residence.
  18. Rules and the necessary type of saving documentation on joint work with customer companies.
  19. Certain notification demands.

AML officer in Lithuania

Key FCIS requirements for AML/Compliance Officer:

  1. He must be a resident of Lithuania.
  2. AML officer must have the appropriate education, professional skills, work experience, worthy personal qualities, transparency, impeccable reputation.
  3. The company should pay attention to the training of its employees, whose activities are aimed at combating financial fraud and money laundering.
  4. A compliance specialist not only monitors and keeps records of various personal financial documents, but also constantly stays in contact with directors and economic bodies.
  5. The AML officer must have sufficient authority to perform his duties and handle reporting to FCIS

AML/Compliance officer obligations:

  • help develop, create, support programs to combat financial terrorism;
  • collect and process all information about questionable procedures or transactions where financial fraud is possible;
  • submit handwritten applications for compliance with all the rules of the current Law to the management of the Virtual Currency Exchange Service Provider or the Cryptocurrency Wallet Service Provider, which is registered in the Commercial Register of Lithuania;
  • is obliged to keep a record of clients who have an increased percentage of risk, and draw up reports on their work;
  • must contact FCIS if it suspects money laundering or financial terrorism;
  • its work includes developing and maintaining a risk assessment system for clients’ products and services and other issues related to money laundering;
  • monitoring and using the AML training program for other employees;
  • carrying out control and reporting to the authorities;
  • conducting accounting and auditing of institutions and monitoring the implementation of all rules.

When does a KYC/AML officer apply an enhanced due diligence?

1.      When interacting with a new customer.

2.      When making a cash payment of more than 15,000 euros or the equivalent in another currency.

3.      When, checking the documentation, finds doubts about its reliability.

4.      When the customer is suspected of financial fraud or terrorism.

Taxation of crypto operations in Lithuania, Accounting and FCIS reporting

The standard corporate tax rate in Lithuania is 15%. Under certain conditions, the effective rate for micro-enterprises can be reduced to 0%.

Tax authorities do not require certain additional reporting from cryptocurrency companies. Accounting is carried out according to the principle of other Lithuanian companies – only with the peculiarity that transactions in cryptocurrency are equated to euros and the tax on the income of a cryptocompany is paid to the state budget in euros.

When it comes to the activities of crypto exchangers and crypto exchanges in Lithuania, VAT rules do not apply to cryptocurrency exchange transactions. In the case of the sale of goods or services for cryptocurrency, VAT 21% is applied to transactions.

Features of taxation of income from the sale of tokens during the ICO depend on the functionality of the token and the stages of its use, so the tax rate can vary between 0-15%.

The activities of NFT marketplaces are also subject to general taxation rules. Intermediary companies that receive income from the sale of NFTs in the form of a commission pay tax on the amount of the commission expressed in euros. Creators of non-fungible tokens – residents in Lithuania (companies and individuals) pay a 15% tax on income from the sale of NFTs, as when selling ordinary goods or property. If the NFT provides for a reward to the creator from the subsequent resale of the token, the royalty rate varies from 0 to 10%, depending on the location of the counterparty.

It is the responsibility of a licensed company to control all clients and transactions, which complies with all AML / KYC requirements. In turn, the FCIS Supervisory Authority also has the right to request from time to time information on the activities of the company, especially related to compliance with AML / KYC rules.

However, they often require the company to constantly comply with AML/KYC obligations: collecting information about customers from a virtual currency project and providing this data to regulatory authorities. In particular, the need for reporting applies to suspicious transactions and transfers exceeding the amount of 15,000 euros (in the form of a single transaction or related transactions in smaller amounts that exceed 15,000 euros in total).

Considering the complexity of drafting internal documents and other nuances, in particular, the peculiarities of the legal structure, we recommend paying attention to a ready-made license for cryptocurrency operations.

Our specialists will be glad to guide you on the process of obtaining a cryptocurrency license in Lithuania, incorporate a compliant entity, provide ongoing consultations and help in communication with FCIS. If you want to save time, you can buy a ready-made company in Lithuania with crypto license and bank account, that is already fully ready to cooperate with clients. Please contact us to receive more information. You can also see our offers in category ready-made companies and licenses for sale.

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