The Markets in Crypto Assets (MiCA) regulation is set to be a landmark legislation for regulating cryptocurrencies and crypto-asset service providers across the European Union. As an EU member state, Lithuania will require companies providing crypto-asset services to acquire a MiCA license once the regulation goes into effect in 2024.
What is MiCA?
MiCA stands for Markets in Crypto Assets. The European Union created a comprehensive regulatory framework to regulate crypto-assets and their service providers. The main goals of MiCA are to:
- Provide legal certainty for crypto-asset issuers and service providers
- Support innovation while protecting consumers
- Ensure financial stability as the crypto market grows
- Prevent money laundering and other financial crimes
Once implemented, MiCA will provide a harmonized set of rules for the EU crypto space. It includes requirements related to authorization, supervision, organization, conduct of business rules, and consumer protection measures.
Why Get a MiCA License in Lithuania?
Lithuania has emerged as one of the most crypto-friendly countries in Europe with the title of Crypto and a Fintech Hub. Due to supportive regulations and an innovative technology infrastructure, it offers a beneficial environment for fintech and virtual asset companies.
Key benefits of obtaining a MiCA license in Lithuania include:
- Access to the entire EU crypto market
- Participation in a thriving crypto ecosystem
- Clarity on legal requirements for crypto businesses
- Enhanced trust and reputation through meeting strict organizational and reporting rules
As a MiCA license holder, your business can seamlessly expand across Europe. You also become part of Lithuania’s growing crypto sector, home to various digital asset exchanges, payment providers, investors, and blockchain startups.
Types of VASP Licenses in Lithuania
The country offers two major cryptocurrency license in Lithuania:
1. Crypto Exchange License
A crypto exchange license authorizes a business to establish and operate a digital currency exchange in Lithuania. Key permissions encompass:
- Facilitating transactions between different virtual currencies
- Allowing the exchange between cryptocurrencies and fiat currencies like the Euro
- Enabling payments into and withdrawals from customer accounts
- Levying commissions or fees on exchange transactions
To qualify for a crypto exchange license, companies must fulfill the requirements:
- Incorporating a legal entity in Lithuania
- Minimum capitalization rules
- Stringent AML, KYC, and reporting protocols
- Secure custody infrastructure
- Strict auditing procedures
2. Crypto Wallet Services License
A crypto wallet services license enables a business to provide solutions for storing and safekeeping customer virtual assets. Primary activities include:
- Generating and managing encrypted cryptocurrency wallets
- Supporting wallet functionality for holdings like Bitcoin, Ethereum
- Facilitating crypto transfers between different parties/wallets
- Offering consulting on best security practices
Eligibility criteria for this type of license covers factors such as:
- Establishing a regulated structure under Lithuanian law
- Maintaining capital reserves
- Implementing strong cybersecurity controls
- Deploying resilient IT systems and hardware
Obtaining crypto licenses can provide access to Lithuania’s favorable blockchain economy while conveying legitimacy to operate across the EU.
Types of CASP Licenses
Crypto-asset service providers (CASPs) are categorized into three classes Class 1, Class 2, and Class 3. Each class offers different services, has its own budget requirements. Below are the details of all the classes.
Note: These classifications and requirements are stipulated under Article 1(a).
| CASP Class Type | Types of Services | Minimum Capital Requirement (Under Article (1)(a)) |
| Class 1 | ● Reception and transmission of orders on behalf of third parties
● Providing advice on crypto-assets ● Execution of orders on behalf of third parties ● Placing of crypto-assets
|
EUR 50,000 |
| Class 2 | Include all services authorized under Class 1, with the addition of:
● Custody and administration of crypto-assets on behalf of third parties
|
EUR 125,000 |
| Class 3 | Include all services authorized under Class 2, plus the following:
● Exchange of crypto-assets for fiat currency that is legal tender ● Exchange of crypto-assets for other crypto-assets ● Operation of a trading platform for crypto-assets
|
EUR 150,000 |
Qualification Criteria for a MiCA License in Lithuania
Obtaining a Markets in Crypto-Assets (MiCA) license in Lithuania necessitates meeting a robust set of qualification standards around legal compliance, capitalization, governance, and reporting protocols.
1. Legal Entity Requirements
The first prerequisite is establishing a company legally registered under Lithuanian national law. The applicant entity can take the form of:
- Private Limited Liability Company
- Public Limited Liability Company
- Branch of an Overseas Firm
All entities must have a physical business address within Lithuania and specified directors and shareholders outlined in the incorporation documents.
2. Minimum Capital Requirements
Applicants for a MiCA crypto license need a minimum paid-up share capital of €50,000 – €150,000 depending on the services provided. Recent financial statements and banking records must provide proof of capital reserves.
3. Corporate Governance
Stringent checks apply to the managers and directors of the licensed entity. Background screening confirms no previous bankruptcy filings or criminal convictions.
At least three board members must be appointed, demonstrating professional experience and technical expertise in blockchain and virtual assets.
4. Risk Control and Compliance Policies
Comprehensive risk assessment policies and mitigation measures must be custom-tailored for crypto-business models. These showcase capabilities in areas like:
- Risk statement regarding the following risks:
- Market Risk
- Counterparty Risk
- Operational Risk
- Cybersecurity Risk
- Anti-Fraud Risk
- IT systems and security arrangements
- Internal governance arrangements
- Clients’ funds and crypto assets safeguarding policy
- Complaint handling policy
- Procedure and system to detect market abuse
- Platforms operational rules
- Business plan and financial projections
Rigorous audits validate the efficiency of these control systems.
5. AML and CTF Protocols
Robust Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) protocols must be implemented, aligning with the EU’s 5th and 6th AML Directives and Lithuanian AML Law. It includes preparation of AML policy and procedures, EWRA, complex Know Your Customer (KYC) checks and suspicious transaction monitoring, etc.
Application Process for a MiCA License
The application process to obtain a crypto license entails five main steps:
- Preparation stage, assessment of business model
- Gather all required documents outlining your business model, governance structure, policies, and procedures. You must demonstrate compliance across capital adequacy, investor rights, and AML/CTF.
- Submission: File your application with the Bank of Lithuania and a license fee. Ensure all relevant forms are correctly completed and supporting documents are attached.
- Review The Bank of Lithuania will thoroughly evaluate your application to ensure regulatory compliance. Additional information may be requested during this stage.
- Interview
- Be prepared to answer in-depth questions from regulators directly about your proposed crypto services, risk management capabilities, and plans.
- Decision: The Bank of Lithuania will decide whether you qualify for a MiCA license within 45 days of your completed application. Regular reporting and audits will follow if approved.
Getting specialized legal guidance is highly recommended through every step of the MiCA licensing process. Experts in financial regulation can help craft a winning application while liaising with Bank of Lithuania officials on your behalf.
Obtaining a Crypto License for Lithuania-Based VASPs
As a member of the European Union, Lithuania has worked to implement regulations in line with the new Markets in Crypto-Assets (MiCA) Directive, which comes into full effect in 2024. This aims to enable virtual asset service providers (VASPs) registered in Lithuania to operate under a harmonized regulatory framework across the EU. However, once MiCA comes into the force, each virtual asset service provider (VASPs) registered in Lithuania and in other EU countries, will have to apply for the new license – CASP license under the MiCA Regulation.
Lithuania-based VASPs must ensure they have an appropriate legal form to apply for a MiCA crypto license, as well as all internal documents, policies, procedures, business plan together with the financial projections and required internal organizational structure.
New key requirements to obtain a crypto license through the Bank of Lithuania for already licensed VASPs include:
- Review and increase capital reserves if needed ( depending on services)
- Stringent AML/CFT policies and controls
- Secure infrastructure and assets custody policies review and preparation
- Strict auditing and reporting procedures
- Preparation of business plan and financial projections
By satisfying these conditions as part of a rigorous application process, Lithuania-based VASPs can gain approval on MiCA CASP license and to offer compliant crypto services in Lithuania and across EU markets under passporting rights. It can ease expansion while ensuring a baseline level of consumer protection against risks like money laundering.
The Future of Crypto Regulation in Lithuania
Becoming a MiCA-regulated crypto business ushers your company into a new era of oversight within Lithuania’s virtual asset market. Regulators gain broad authority under the regime to monitor operations, enforce conduct standards, and penalize violations. Despite added compliance burdens, active participation helps cement legal legitimacy as the adoption of digital coins and blockchain applications keeps accelerating across Europe.
Conclusion
As a pioneer in Europe’s evolving regulatory environment for cryptocurrencies, obtaining a MiCA license enables Lithuanian firms to demonstrate compliance, gain legitimacy, and access new opportunities across the region’s accelerating virtual asset marketplace. Though oversight is expanding, active engagement paves the way for ethical innovation and sustainable crypto adoption over the long term.