CRYPTOCURRENCY EXCHANGE AND CRYPTO CURRENCY WALLET OPERATOR LICENSE

Being recognized traditional finance jurisdiction in European Union and European Economic Area (EU/EEA) Lithuania recently introduced cryptocurrency exchange and crypto currency depository wallet operator registration being one of few European Union (EU) members states having virtual currency licensing and authorization procedure.

Types of crypto activity authorization

There are 2 types of cryptocurrency authorization:

Crypto currency exchange operator is the company or the affiliate of other company exchanging cryptocurrency owned by the client for the commission fee

Crypto currency depository wallet operator is the company or the affiliate of other company managing client cryptocurrency depository wallets

Activities of the cryptocurrency exchange and crypto currency depository wallet operators need to be separated from the licensed financial activity (payment and electronic money institution,bank, etc.). Nevertheless, licensed financial institutions allowed to serve the fiat payments of the crypto dealing companies and their clients creating effective vehicle for crypto-fiat payments.

Initial Coin Offering ICO registration for tokens distribution in Europe

Initial Coin Offering (ICO) and token distribution for the investors in Europe requires separate authorization. Separate AML/KYC and other reporting requirement are established for the companies carrying out  ICO activities and attracting financing through the public distribution of tokens and virtual coins to the investors. Lithuanian registered legal entities (companies) as well as Lithuanian registered affiliates of EU and non-EU companies allowed to register and publicly distribute virtual coins offering themto the investors in all EU/EEA area.

AML/KYC requirement for the companies holding cryptocurrency authorization

Lithuanian registered legal entities (companies) and Lithuanian registered affiliates of EU and non-EU companies can apply for the crypto authorization. Applicants need to have all necessary AML/KYC polices and implemented procedures necessary for the provision of cryptocurrency related activities. Cryptocurrency exchange and crypto currency depository wallet operators are supervised by Lithuanian Financial Crime Investigation Unit – FIU.

Members of the Management Board as well as Ultimate Beneficial Owners (UBO’s) of the company need to meet the requirements of impeccable reputation. There is no requirement forth the directors and members of the board to be Lithuanian/European residents.

General requirements for the entities engaged in cryptocurrency activities:

– Customer identification and verification

– Reporting to Lithuanian FIU

– Keeping records and client data

– Employment of Lithuanian AML officer

– Preparation of  AML/KYC polices and implementation of internal control procedures

ECOVIS services in the field of cryptocurrency registration and authorization

ECOVIS ProventusLaw provides full set of cryptocurrency exchange and crypto currency depository wallet operator authorization services including company registration in Lithuania and preparation of all required AML/KYC policies and procedures. After the authorization process ECOVIS provides bookkeeping and Lithuanian FIU compliance services for authorized entities.

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Kęstutis Kvainauskas

Lawyer, attorney at law, partner of the law firm.

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