Global adoption of the cryptocurrency is getting back on track compared to its peak adoption results back in Q2 2021 according to the recent Chainalysis Geography of Cryptocurrency Report. According to the same report, cryptocurrencies are popular because they allow sending remittances, preserving savings in times of fiat currency volatility, and fulfilling other financial needs unique to certain economies. This means that cryptocurrencies are becoming the new normal. So, what impact does this trend have on the Lithuanian crypto companies’ ecosystem?
The Financial Crime Investigation Service made a VASP review (available in Lithuanian, can be downloaded here) for the period of 2020-2022 January. The FCIS review concludes that increasing number of reports (SAR, CTR and designation of MLRO) confirms the trend of growing crypto companies’ activity in Lithuania. However, in the same review the FCIS identified that such trends as no real office, no local employees, CEO/UBO not a resident of Lithuania, low number of Lithuanian customers indicate that the connection with Lithuania is weak. What is more, majority of active crypto companies still do not report properly to the FCIS. Therefore, the FCIS concludes that with the coming stricter changes in the crypto companies’ regulation quite a few VASPs will not meet the new requirements.
The crypto companies’ regulation in Lithuania is stricter starting from November 2022. That is one of the reasons why the FCIS carried out several crypto companies inspections. Deficiencies in the field of AML/CTF were identified. Therefore, we can expect increased regulator’s attention to the VASP sector. As a result of this regulatory scrutiny crypto companies’ maturity should increase soon as business will do better to keep up with the regulatory requirements.
What is more, the number of registered crypto companies in Lithuania has increased significantly – 788 were registered during January-October 2022, therefore there will be more activity in the financial services sector related to virtual currencies. So, the combination of increased regulatory scrutiny and the growing number of crypto companies in Lithuania is in line with the global trend of crypto adoption and we should expect more cryptocurrencies activity in Lithuania.
If you are a crypto company, we highly recommend you follow regulatory requirements, review and (or) audit processes & procedures, use blockchain analysis tools. If you are a financial institution and serve cryptocurrencies business, then it is about time to enhance your crypto company onboarding process, upgrade source of wealth verification process to meet cryptocurrencies’ features and train your staff to have a better understanding of the cryptocurrency business. Our experts are always ready to meet your needs.
Prepared by Austeja Viederyte, the Head of AML Group