Lithuania stands out within the European Union as one of the few member states where financial transactions using cryptocurrencies are legally recognized. Between 2019 and 2020, the Financial Crime Investigation Service (FCIS) of Lithuania introduced a comprehensive legal framework covering virtual assets and Initial Coin Offerings (ICOs). This move established a welcoming, regulated, and transparent legal environment for companies offering cryptocurrency exchange and wallet services. Due to its flexible regulatory setup, lack of special requirements for company directors or shareholders, and reduced cost barriers, Lithuania has become a popular choice for crypto businesses seeking compliance. Since 2020, major exchanges like Binance have operated under Lithuanian authorization for crypto exchange and custodian wallet services in the European market. This guide provides a detailed overview of crypto license categories and the application process in Lithuania.
Types of Crypto Licenses
The Lithuanian FCIS offers two main types of licenses for virtual currency businesses:
Cryptocurrency Exchange License
This license covers services involving the exchange of fiat currency for crypto, crypto for fiat, and crypto for crypto. It is designed for businesses operating cryptocurrency trading platforms.
Crypto Wallet and Custodian Services License
This authorization applies to services that generate encryption keys for clients or safeguard customer cryptographic keys. These keys are used for storing, holding, and transferring virtual currencies.
Application Requirements
To apply for a crypto license in Lithuania, businesses must meet the following conditions:
- Establish a cryptocurrency-focused limited liability company (UAB) in Lithuania. A UAB is a closed joint-stock company where shares can be sold, donated, or inherited. The company must have at least one owner (natural or legal person) and one director (natural person) authorized to represent the firm.
- Provide clean criminal records for all company members.
- Appoint an Anti-Money Laundering (AML) Officer with relevant professional experience and no reputational risks. The officer is not required to reside in Lithuania.
- Implement procedures for background checks and identity verification for all customers.
- Maintain customer data securely and make it available to regulators upon request.
- Develop internal control and risk assessment protocols.
- Submit detailed resumes for all key participants and persons in management positions.
- Be prepared to report regularly to the FCIS as required.
- Ensure full compliance with AML and KYC regulations.
Taxation Policies
1. Taxation for Crypto Companies
Virtual currency exchange services are exempt from Value Added Tax (VAT). However, services paid for with virtual currency are subject to standard VAT rules. Profits of crypto companies are taxed at a corporate income tax rate of 15%. Micro-enterprises with fewer than 10 employees and annual revenue under €300,000 may qualify for a reduced rate of 0% to 5%. A 15% withholding tax (WHT) is applied on distributed profits (dividends).
2. Taxation for Crypto Transactions
The tax treatment of virtual currency transactions depends on their nature. If the tokens resemble securities, investments, or other currencies, they may be exempt from direct taxes. All virtual currency transactions must be valued in euros and reported according to Lithuanian VAT regulations.
Frequently Asked Questions
Why choose Lithuania for a crypto license?
Lithuania offers fast processing times and low application costs. It is considered one of the most favorable jurisdictions in Europe for cryptocurrency projects. Businesses can obtain the necessary licenses in as little as one month, and the financial costs are significantly lower than in other EU countries.
How long is a cryptocurrency license valid in Lithuania?
Crypto licenses issued in Lithuania are valid indefinitely, provided the licensee remains compliant with all regulatory requirements.
What challenges might arise during the application process?
The most common issue is license revocation, often due to changes in company ownership that were not reported to regulators. Another frequent problem involves the appointed AML officer lacking the qualifications or ability to perform their duties effectively.
Can non-residents own a crypto company or serve as board members?
Yes. Non-residents and foreigners are permitted to own and manage crypto companies in Lithuania. There is no requirement for owners or board members to be physically present in the country.
What is the minimum share capital required?
The minimum authorized capital for a crypto service provider is €2,500. This amount must be paid in full before submitting the license application. Note that cryptocurrency cannot be used for this payment—it must be transferred from a personal account to the company’s bank or electronic money institution account in Lithuania.
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