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Lithuania Sets Crypto-Asset Expectations Ahead Of MiCA Implementation

August 28, 2024
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The Bank of Lithuania has issued a formal letter outlining its expectations for entities currently providing or intending to provide services related to crypto-assets.

The Bank of Lithuania has issued a formal letter outlining its expectations for entities currently providing or intending to provide services related to crypto-assets. 

In the letter,  in Lithuanian, the central bank urged crypto entities to begin preparations now to ensure compliance with the EU’s Markets in Crypto-Assets (MiCA) regulation, which is set to take full effect on December 30, 2024.

The letter sets out the regulator’s process for evaluating applications for crypto-asset service provider licences and the timescales it will work to. 

The central bank has also made it clear that only providers with a strong understanding of risk management and the crypto-asset industry will be licensed. 

The MiCA regulation is intended to bring the crypto-asset market under a regulated and supervised financial system across the EU, with all participants in the trading bloc required to obtain appropriate licences. 

Key provisions of the regulation will impose stringent requirements on service providers, including governance, client asset protection and conflict of interest management.

The Bank of Lithuania's letter emphasised key aspects of the MiCA regulation that crypto-asset service providers must follow, offering best practices and expectations for compliance. 

It highlighted the high risks in the crypto-asset sector, such as money laundering, terrorist financing and fraud, underscoring the need for thorough preparation to manage these risks. 

Expectations

The Bank of Lithuania has said that it will conduct a thorough evaluation before granting licences to crypto-asset service providers. 

Key factors include the transparency and simplicity of the applicant's shareholder structure, the reputation of shareholders and managers, and the transparency and integrity of financial resources. 

Additionally, the applicant must demonstrate effective management systems, relevant qualifications and operational readiness to maintain sustainable, safe and reliable operations with strong internal controls and risk management. The applicant must also be genuinely engaged in real activities, not merely a shell entity.

To ensure a smooth and efficient licensing process, the regulator emphasised the importance of thorough preparation. 

Applicants must be well-prepared, submit high-quality and organised documents and fully understand relevant legislation, including MiCA regulations.

The regulator has said that strict quality standards will be applied, warning that inadequate preparation or incomplete submissions will lead to rejection. 

Only transparent and honest service providers will be permitted to operate, with full cooperation and accurate information expected throughout the process. 

Meanwhile, all required documents, including business plans and customer-facing procedures, must be detailed, tailored to the specific business model, and submitted in Lithuanian, and the central bank has added that it may also request additional documentation to ensure full compliance with MiCA regulations.

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The Bank of Lithuania will follow a structured process for evaluating applications for crypto-asset service provider licences. 

Upon receiving an application, the bank will confirm its receipt within five working days. 

Within the next 25 working days, the bank will check if the application is complete, requesting any missing information if necessary. 

Once all required information is provided, the bank will evaluate the application within 40 working days, with the possibility of extending this period by an additional 20 days if further review is needed. 

After completing the evaluation, the bank will inform the applicant of its decision within five working days.

The bank may refuse to issue a licence if there are objective and reasonable grounds for doing so, particularly if close ties between the applicant and other parties hinder effective supervision, or if issues related to third-country laws complicate regulatory oversight.

The Bank of Lithuania has committed to supporting market participants by offering advice on MiCA-related issues, organising consultation events and regularly updating its website with relevant information, including application forms, questionnaires and FAQs related to the upcoming licensing process.


     



     

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