Since blockchain paves the way for greater transparency, its impact goes beyond the finance sector. With a lack of need for intermediary banks in the face of peer to peer transactions, governments across the globe put regulations in place to watch the cryptocurrency work.
In 2023, revenue generated from the DeFi market is estimated to cross USD 6500000. This is coupled with widespread adoption of cryptocurrencies by notable commercial entities like Tesla, Roblox, LinksDAO, PayPal, and more. As the legitimacy of crypto investments skyrockets, so do legislative concerns. Verily, legal frameworks constantly update to deal with issues of security and volatility in the ever-evolving landscape of cryptocurrency.
Lithuania’s progressive stance on crypto regulation
Lithuania’s stance on virtual currency regulation is touted as a landmark move across the European Union. In 2017, the government announced that it would regulate wallet and exchange service providers through a meticulous licensing process. This enabled entrepreneurs interested in crypto to set up their business through a clear cut process for registration.
At the same time, the national Lithuanian bank prohibited conventional organizations in the financial sector to trade crypto currencies or offer the letter as a mode of payment. This was done to curb the threat of money laundering and terror funding. For companies that offer wallets and exchange services, registration criteria is clear and governed by the official financial intelligence body. Additionally, all such market participants are required to implement Anti-money-laundering (AML) and Know Your Customer (KYC) procedures.
Today, by bringing vast clarity to cryptocurrency operations in the country, Lithuania successfully manages to create a predictive ecosystem that welcomes innovation without compromising investor rights. On a larger note, regulation also shields the economy against taxation fraud. ICOs have access to a list of transparent guidelines for tax filing, making evasion extremely hard given that these companies are ordained by law to have internal control policies and report to the financial intelligence unit.
Lithuania: A Fintech Masterpiece In A Nutshell
On the fintech front, Lithuania takes the charge through a futuristic approach to innovation. In 2016, the FCA launched the sandbox, a regulatory initiative that enables fintech startups to test financial products in a dynamic environment detached from real life regulatory pressures. Over the years, this has birthed a plethora of top tier business models that continue to generate GDP for the Lithuanian economy.
This allows more businesses to flock to Lithuania, not only because of its regulatory support but also due to its thriving culture for tech-first ventures. Within the European Union, the country attracts a horde of entrepreneurs every year. Some of the most popular names of fintech companies call Lithuania home. There are over 260 licensed fintech businesses currently thriving in the country and this number is only expected to grow. At present, these companies amass a collective workforce with 7000+ employees.
Lithuania’s proactive approach clearly refers to its dedication to boosting technological innovation that too, alongside strengthening an already robust regulatory system for the finance sector. Today, ambitious entrepreneurs and innovators from across the world view the nation as an emerging hub for cryptocurrency ventures.
New Strategies to Boost Customer Convenience and Financial Efficiency
As far as forward-thinking governments go, Lithuania plans to further its fintech success through a brand new strategy. Recognizing that the growing landscape of fintechs imposes greater responsibility on government decision makers, leading personality, Simpnas Krepsta, from the bank of Lithuania is establishing policies that focus on improving the quality of fintech services.
The bank strives to foster competition in the financial sector and enhance its global image. The resurgence of EMIs (electronic money institutes) alongside PIs (payment institutes) add an innovative edge to the financial services market. These companies receive money from the customer and issue electronic money in exchange. As non-bank entities, they are far more flexible and customer-oriented. These advantages naturally introduce elements of competition to the industry.
Similarly, PIs offer payment solutions such as money transfers which further improves financial accessibility. Compared to conventional financial organizations, EMIs and PI rely on softwares, apps and other technological tools to provide their services without incurring exorbitant costs. So for the portion of the population unable to avail bank services, PIs step in to fill the gap.
Latest Developments: EMI, PI and Crowdfunding
In recent years, payment and electronic money institutes have encouraged other companies in the financial sector to up their game as well. New payment methods have emerged to facilitate more customers. This is particularly useful since it cuts down the time needed for international payments to come through. Seeing as how PIs and EMIs have more efficient systems to support online transactions, be it within national borders or beyond, the entire industry has shifted toward a customer-convenience focus.
The benefits also extend to the customers. Since the costs incurred by these institutes are low due to technology adoption, their services are relatively more affordable. To keep up with the popularity of PIs and EMIs, the Lithuanian government has been taking ample measures to ensure compliance.
At the same time, there have been ongoing developments related to P2P and crowdfunding platforms in the country. Since 2019, the Lithuanian government has rolled out policies to govern how crowdfunding platforms operate. This ensures a sense of stability by clarifying what these businesses can and cannot do.
However, a solid regulatory framework isn’t the only reason crowdfunding ventures are growing. According to the EU Basel AML index, Lithuania takes the 6th spot for being one of the least risky areas in terms of money laundering. This makes it extremely attractive for new-age ventures eager to set up their services.
Since crowdfunding companies allow other business models to gain capital from different sources, they boost the economy by default. This is precisely why Lithuania shows support for regulating crowdfunding platforms.
To allow crowdfunding institutes to serve countries across the European Union, a regulation went into effect in 2021. Simply put, interested companies are now able to obtain a pan-european license which makes them eligible to operate within the EU, and beyond Lithuania alone. Naturally, this paves the path to greater business opportunities, boosts competition even more and aids financial innovation across the board.
Initial Challenges Faced by The Crypto Industry
At the start of its journey, cryptocurrency in Lithuania was met with numerous challenges. However, they served as a trigger for the government’s now-famous proactive approach to financial innovation.
In its early stages, the absence of detailed laws and policies presented a major setback. Investor confidence depends on certainty and with that being out of the picture, individuals were skeptical of crypto-related organizations. In turn, this negatively impacted the general perception of virtual currencies.
Digital money was once synonymous with security breaches and money laundering activities. Not only did this discourage potential investors from considering crypto as a viable option, it also made conventional financial institutes suspicious.
Prior to the establishment of the regulatory framework, businesses working in the virtual currency market had trouble getting access to essential banking. Due to fear of breaching compliance or risking their own interests, various banks refused to serve seemingly dangerous crypto ventures.
As the fintech hub of the EU, the financial services industry in Lithuania heavily depends on digital security technology. Investments by crypto businesses toward curbing scams and system hacks have remained strong to maintain safety within crypto transactions.
Safe to say, Lithuania’s progressive environment benefits both individual stakeholders and the government itself. By gradually integrating blockchain technology into the financial industry, regulatory bodies have significantly removed the fear once associated with virtual currency trading.
Top 7 blockchain ventures in Lithuania
Regulations in Lithuania lay the groundwork for its booming blockchain landscape. Due to market stability alongside fairness of legal protocol, long term investors have set up a plethora of diverse business models.
Moon.ws is a platform that implements play to earn as well as play to learn capabilities. It is based on a decentralized framework with a gamified interface that allows users to experience lunar exploration in real time. Since the app is supported by Binance smart chain, when users reach specific metrics while exploring the surface, they can earn digital assets such as NFT land, contribute to new world development, and add value to the virtual economy.
Over the counter trading in Lithuania is nothing new. Since the last 5 years however, platforms that facilitate OTC trading have sprouted in noticeable numbers. One of the many successful ones to serve people in Lithuania is Secretum.
A decentralized platform with encrypted messaging functionality as well as options for OTC trading was established in 2021, Secretum strives to make trading simpler and more convenient for its users. It offers several features like peer to peer trading for crypto and NFTs, wallet validations, and a lot more.
Deferee combines sports, digital social interactions, betting, and blockchain, four on one screen. This is one of the early age startups that became available to the Lithuanian public in 2018. As a gamified sports social platform, users can compete against one another, place bets and receive app rewards. What truly makes Derefree stand out from the crowd is its marketplace. Whereby, user rewards can be exchanged for guidance from desired experts registered on the platform.
As a crypto friendly country Lithuania has achieved blockchain proliferation across its industrial landscape. So, it isn’t just finance that has been impacted. In fact, the public’s acceptance of crypto-related products and services extends into almost every single sector.
Mathos is a result of one such collaboration between two leading educational institutes in the country. With the help of AI, the platform helps match students with suitable teachers that are similar on metrics such as knowledge degree, personality traits, and desired motivation levels.
This Edtech app also has a marketplace based on a digital rewards system. This is where blockchain technology comes in. Simply put, as students gather achievement points on the app, they can qualify for earnings.
As the name suggests, PickVibe is all about finding the people that resonate with you. The social networking platform targets working professionals aspiring to join reliable communities they can thrive in.
It is a new spin on online business management led by people. Users can deploy features to manage time, organize activities, plan social outings and more. Alternatively, while Pickvibe markets itself as a social app, it also provides an integrative marketplace for people to buy and sell products/services via digital currencies. Every year, the company has reported growing traffic to the website which means that more users register by the day.
Known as a company that partners with others in the decentralized computing niche, Nunet is a P2P application. The platform uses AI and deep tech to introduce machine learning agents to new-age devices. All of this is conducted in a decentralized ecosystem that promises transparency above all else. Unlike most other blockchain-related startups, Nunet is open source and free for everyone. The app is supported by encryption functionality that boosts its security without imposing any limits of connectivity.
ZenRepublic takes an innovative approach to virtual reality social platforms in the metaverse. It uses Web 3.0 technologies to connect users in a virtual environment. Although one of the newer blockchain startups around, Zen Republic offers advanced gaming capabilities for everyone that signs up.
These games come with interesting challenges and rewards to engage users. ZenRepublic makes it easy for people to trade NFTs and similar collective technologies. Overall, the app is targeted toward art enthusiasts and event exhibitionists.
Being expert in the field Star Legal will help to obtain Crypto license in Lithuania and build strong foundation for successful business start.
Regulation surrounding the set-up of crypto-related businesses in Lithuania
Entrepreneurs known for their leading blockchain startups in Lithuania must strictly adhere to the government’s legislative policies. For new business owners and ambitious innovators alike, laying the foundation of a crypto company revolves around various factors.
Business category selection
Crypto and blockchain are so widespread in Lithuania that choosing a business category within this niche is a crucial first step. It all depends on what the entrepreneur wants to do.
Are you setting up a completely new business model, or seeking a partnership? Aside from this, the magnitude of expected company operations is also necessary for licensing requirements.
Obtaining a license
Lithuania prohibits crypto-related ventures from operating unless they have legitimate licenses approved by the nation’s governing bodies. In the case of a virtual currency exchange, company must get VASP authorization company before it can officially start offering services to the public. Bear in mind that different to obtain VASP licenses companies have to meet capital and policy requirements.
Know Your Customer (KYC) Requirements
Lithuania offers a progressive environment for crypto ventures to take root and thrive. However, it also takes stringent action against those who fail to follow protocol. One of the two most important compliance requirements is KYC. All companies in the crypto niche are legally ordered to implement KYC procedures. This is to ensure that every transaction is recorded against the verified identity of a client. KYC protocols help curb fraud and money laundering by a large margin.
Anti Money Laundering Requirements
Similar to a Know Your Customer, Anti Money Laundering (AML) procedures are considered equally significant. This is an umbrella term for several protocols that businesses must follow to protect the rights of their customers and ensure maximum operational transparency.
Ongoing reporting and adherence to compliance updates
Compliance requirements are never stagnant, especially in today’s dynamic era. To strengthen the blockchain structure within Lithuania, the government has introduced various updates to law over the years. On a similar front, all companies in the crypto niche must regularly report to the relevant authorities to prove that they adhere to changing compliance.
Being expert in the field Star Legal will help to obtain Crypto license in Lithuania and build strong foundation for successful business start.
Safe to say, crypto regulation in Lithuania has made waves not just in the EU but across the world. The government’s positive reinforcement for crowdfunding, P2P, wallet exchanges and other types of virtual currency ventures continues to lead the charge in crypto regulation beyond national borders. As a result, payment and electronic money institutes are on the rise. It is also important to recognize that Lithuania’s support for blockchain products and services doesn’t just benefit entrepreneurs. If anything, the advantages ripple back to the public and economy.