Cryptocurrency Legislation in Lithuania in 2024

Lithuania’s cryptocurrency legislation landscape in 2024 reflects a proactive and adaptive approach to regulating virtual currency-related activities. The Lithuanian government has shown an open and favorable attitude towards virtual currencies, focusing on creating a regulated and monitored environment for their use and exchange.

Regulatory Framework and Government Stance

The Lithuanian law defines virtual currency as a digital representation of value that does not have the legal status of currency or money and is not issued or guaranteed by any central authority. It is, however, accepted as a means of exchange and can be transferred, stored, and used electronically. The Financial Crimes Investigation Service (FCIS) and the Bank of Lithuania play crucial roles in supervising virtual currency exchange operators and depository virtual currency wallet operators (VASPs) in relation to anti-money laundering (AML) and counter-terrorist financing (CFT)​​.

Virtual Currencies as Financial Instruments

The Bank of Lithuania recognizes that virtual currencies may, in some cases, possess characteristics of financial instruments. Consequently, entities dealing with virtual currencies might be subject to financial markets legislation. However, financial market participants under the Bank of Lithuania’s supervision are generally discouraged from engaging in activities associated with virtual currencies​​.

Anti-Money Laundering Directive and VASP Requirements

Lithuania has transposed the EU’s Fifth Anti-Money Laundering Directive into national law, introducing stricter requirements for VASPs. These entities must undergo a mandatory registration process before engaging in VASP activities, confirming their compliance with AML and CFT regulations. VASPs are subject to a variety of requirements, including maintaining a minimum registered share capital, appointing a senior employee as an AML officer, and establishing internal policies and procedures for preventing money laundering and terrorist financing​​.

Taxation of Cryptocurrencies

Lithuania does not have specific legislative provisions for the taxation of cryptocurrencies. The usual taxation rules apply, with cryptocurrencies classified into different asset classes depending on the applicable tax laws. Individuals and businesses must report cryptocurrency-related income and gains for tax purposes​​.

Customer Due Diligence and Travel Rule

VASPs in Lithuania are required to implement robust customer due diligence procedures to prevent money laundering and terrorist financing. These procedures include identifying and verifying customer identities and monitoring business relationships. Starting from 1 January 2025, VASPs will also be required to comply with the Travel Rule, which mandates the collection, storage, and transmission of certain transaction and customer information​​.

Fostering Innovation and Technology

Lithuania has shown a keen interest in attracting FinTech companies and promoting the development of new products based on distributed ledger technology. The Bank of Lithuania launched LBChain, a blockchain sandbox, to facilitate the testing and adaptation of blockchain-based services and foster innovation in the financial sector​​.

Cryptocurrency Mining

While there are no specific regulations for cryptocurrency mining in Lithuania, mining operations are subject to general regulations regarding electricity consumption, land use, and environmental protection. Miners are advised to comply with these laws, and mining activities may be subject to taxation in certain cases​​.

In summary, Lithuania’s approach to cryptocurrency regulation in 2024 is characterized by an adaptive legal framework, stringent AML and CFT requirements for VASPs, application of standard taxation rules, and a supportive stance towards innovation in financial technology. This regulatory environment aims to balance the need for innovation with the requirements of financial security and consumer protection.

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