Lietuvos bankas and FCIS step up cooperation on supervision of crypto-asset services

“Next year, crypto-asset services will become licensed and regulated across the European Community. We will have to ensure that only well-prepared players enter the domestic and European market, providing quality services to consumers and properly managing risks, in particular relating to money laundering and terrorist financing (AML/CTF) as well as fraud. There are currently over 300 crypto-asset companies registered in Lithuania, representing one of the highest numbers in the European Union. We are well prepared for the licensing challenge and we will strive to continue to strengthen our capacity together with our colleagues from the FCIS,” says Gediminas Šimkus, Chair of the Board of Lietuvos bankas.

“Since the FCIS was entrusted with the supervision of the crypto-asset sector, we have accumulated vast experience and knowledge and have a clear view of the sector’s AML/CTF weaknesses. The increasing number of players in the sector and rapidly changing environment pose challenges for the implementation of effective AML/CTF measures, and supervisory authorities must step up cooperation and exchange available information to tackle potential risks. We are ready to share our experience with our collegues from Lietuvos bankas and to work together,” says Rolandas Kiškis, Director of the FCIS.

The Regulation on markets in crypto-assets (MiCA) comes into force across the EU next year. This means that crypto-asset service providers will have to become licensed financial market participants to continue operating. They are currently not licensed in Lithuania but are included in the company lists of the Centre of Registers. They are supervised to some extent by the FCIS and once MiCA comes into force, crypto-asset service providers will have to obtain a licence from Lietuvos bankas or cease their activities. 

The National Risk Assessment of Money Laundering and Terrorist Financing Report published by the FCIS at the end of October identified crypto-asset, electronic money and payment institutions as presenting the highest degree of AML/CTF risks in 2019–2022.

As of 2019, crypto-asset service providers are subject to certain AML/CTF requirements. This year, the requirements for crypto companies (capital, compliance) were tightened on the initiative of Lietuvos bankas, FCIS, Centre of Excellence in Anti-Money Laundering, Ministry of Finance and Ministry of the Interior. Only half of the institutions registered in Lithuania were able to meet the new basic capital requirements.

In addition to new innovations and opportunities, the analysis of the crypto-asset sector by Lietuvos bankas and FCIS also identified a number of cases of empty shell institutions, signs of fraud, entities associated with countries recognised as terrorist states in Lithuania, and other risks. At the beginning of November, at the request of the FCIS, the Centre of Registers removed 300 companies from the register because they did not comply with the basic own funds requirements (own funds must amount to at least €125,000). 

Currently, Lietuvos bankas is working hard to prepare for the upcoming licensing, is optimising resources and has expressed its expectations that potential participants should only apply for a licence if they are well prepared: they should submit a business plan based on objective criteria, evidence of how they will meet compliance requirements and disclose all information on shareholders, managers, sources of income, etc. Applicants who are well prepared for the licensing process may apply for a preliminary assessment earlier, without waiting until the end of the year. Licences will not be granted to companies with no intention to conduct actual operations, applicants who fail to provide the requested information or provide incomplete, incorrect or misleading information.  

Supervision of financial market participants, Fintech, AML