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Media & Events No transition period for implementation of MiCA in Lithuania

No transition period for implementation of MiCA in Lithuania

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Highlights:

  • There will be no transition period for the implementation of MiCA (Regulation (EU) 2023/1114 on Markets in Crypto-Assets) requirements in Lithuania according to a recent press release of the Lithuanian Central Bank (Central Bank).
  • MiCA lays down uniform requirements for crypto-assets as well as requirements for crypto-asset service providers within the whole European Union.
  • It shall fully apply in Lithuania starting from 30 December 2024, at which point all crypto-asset service providers as well as other regulated entities shall already have the necessary authorization in accordance with MiCA. 
  • All Depository Virtual Currency Wallet Operator and Virtual Currency Exchange Operator, which are currently registered in Lithuania, will be regulated by MiCA starting from next year.
  • All affected persons in Lithuania should start preparing their companies for the authorization process in Q1 2024!

"The MiCA Regulation will create common rules for regulating cryptocurrency activities across the EU, but it will not eliminate all risks, including those related to money laundering and terrorist financing. Therefore, the implementation of MiCA needs to be prepared responsibly and will require constructive cooperation of all relevant institutions," recently commented Gediminas Šimkus, Chairman of the Board of the Bank of Lithuania. It is the stated aim of the European Commission and other involved institutions that the implementation will ensure a higher level of protection for non-professional investors and better manage the risks of money laundering and terrorist financing.

 

Member States may decide to exempt crypto-asset service providers from the transitional regime or to shorten its duration. The Ministry of Finance proposes that the full licensing process in Lithuania should start earlier than the proposed deadline in the Regulation. It is currently drafting seven draft amendments to existing Lithuanian national laws in order to implement and further detail MiCA requirements.

 

According to data from the Lithuanian company register there are currently 505 Virtual Currency Exchange Operators and 498 Depository Virtual Currency Wallet Operator registered. 


In addition to crypto-asset service providers MiCA also regulates entities related to:
  • the issuance, offer to the public and admission of crypto-assets to trading on a trading platform for crypto-assets;
  • issuers of asset-referenced tokens and issuers of e-money tokens; and
  • holders of crypto-assets in the issuance, offer to the public and admission to trading of crypto-assets. 

Already licensed Lithuanian financial institutions will also have the possibility to become authorized as crypto-asset service providers, in addition to their existing license. 

Compared to the current legal framework MiCA is bringing the following changes for crypto-asset service providers:

  • Service providers will have to meet the legal requirements in order to obtain an authorization from the Bank of Lithuania prior to start of operations. Currently a simple registration with the company register is sufficient. With one authorization services can be passported into the whole European Union. 
  • During the authorization crypto-asset service providers must meet the same or similar standards that the Bank of Lithuania currently sets for payment and electronic money institutions. At the moment only the Lithuania Law for the Prevention of Money-Laundering foresees certain requirements regarding AML compliance. 
  • The former includes: 
  1. Capital requirements
  2. Business continuity policy, 
  3. Disaster recovery plans, 
  4. Internal control mechanisms and effective procedures for risk assessment, 
  5. Systems and procedures to safeguard the security, integrity and confidentiality of information,
  6. Procedures and arrangements to monitor and detect market abuse as well as
  7. Requirements for outsourcing.

  • There will be additional legal responsibilities for crypto-asset service providers like:
  1. signing written agreements with customers that clearly identify the responsibilities,
  2. compensations for loss of crypto-assets due to cyber-attacks or malfunctions,
  3. providing customers the information about characteristics, functions and risks of crypto-assets they intend to purchase,
  4. acting honestly, fairly and professionally in the best interest of the customer (e.g., making pricings public),
  5. customer asset safeguarding.

The high number of potential applicants will necessitate a very well planned authorization process, both on the side of the Lithuanian Central Bank as well as on the side of applicants. A successful application might require changes to the business model, corporate governance processes and staff. All companies dealing with crypto assets and registered in Lithuania should evaluate the possible impact of MiCA and an application process during the course of 2024 right away!

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