The Crypto Economy Organization advocates for the regulation of the crypto market by establishing balanced and reasonable, and most importantly, clear licensing and other rules of conduct for crypto market players. The association also fundamentally supports the idea of the Ministry of Finance to speed up the entry into force and application of MiCA in Lithuania, thus becoming the first EU country where clear rules would come into force in full and immediately. And this would be a significant advantage for our entire economy, a big positive impulse.
However, the amendments to the laws proposed by both the Ministry of Internal Affairs and the Ministry of Finance will not help achieve these goals, as they have been prepared rather hastily, thoughtlessly, and lack legal logic and compatibility with Lithuanian and EU law.
“Crypto Economy Organization” submitted proposals to the authorities on how to correct and improve draft laws prepared by the Government that are inconsistent with legal requirements and essentially unenforceable.
The draft prepared by the Ministry of the Interior would distort competition, grant unjustified privileges to some credit institutions, but discriminate against other participants in the financial market.
According to the project of the Ministry of Finance, businesses seeking licenses are given only one day to collect dozens of documents, the requirements for which will be approved only in the future.
The projects do not discuss the rights and obligations of the Bank of Lithuania when approving licenses.
Potential investor losses as a result of these actions may have to be borne by taxpayers.
In order to strengthen the crypto asset business operating in Lithuania, the association “Crypto Economy Organization” (CEO), which represents its participants, calls on the Government of Lithuania to improve the draft laws for this market. Their current versions, although one can understand their logic and goals, are not fully developed, do not harmonize with Lithuanian and EU law, discriminate against market participants, are incomplete from the point of view of legal technique, and lack legal logic. Because of all this, the adopted laws will not work in life, will become difficult or impossible to implement in practice. In addition, part of the investors will leave Lithuania and circle around it, and the investors who leave will likely file lawsuits against Lithuania for losses caused by significant and unjustified restrictions on their investments.
“We invite the authors of the draft laws to take into account the shortcomings indicated by legal experts. By doing this, it will be possible to more effectively ensure what the Government and the Bank of Lithuania are essentially aiming for with these proposals – the sustainable, risk-managed and transparent development of the crypto assets market in Lithuania. We are for the regulation of this market, and we believe that a balanced and intelligent regulation will ensure the long-term goals of the legislators and will be positive for our economy”, says CEO president Vytautas Kašėta.
According to legal experts, the proposals of the Ministry of Internal Affairs and the Government to change the Law on Money Laundering and Terrorist Financing Prevention (PPTFP) need to be amended. It is also necessary to improve the regulation proposed by the Ministry of Finance by abandoning the requirements of the transitional EU crypto market regulation MiCA (Markets in Crypto-Assets) and entrusting the issuing of licenses to the Bank of Lithuania.
For example, the proposed changes to the PPTFP Law are against EU and Lithuanian law, as they distort competition and privilege individual credit institutions. The amendments aim to establish that operators of virtual currency exchanges, operators of depository virtual currency wallets (VASP) can deposit the authorized capital funds (EUR 125,000) only in a Lithuanian credit institution or in an EU member credit institution with a branch in Lithuania.
“This singles out a small group of economic entities, and impermissibly limits business opportunities to acquire the services of credit institutions in other EU states,” emphasizes V. Kašėta.
In addition, if they were to be established, such changes would be difficult to implement, as most Lithuanian credit institutions do not currently provide financial services to the VASP sector in their practice.
Reckless rush to EU regulation
On the other hand, the proposals of the Ministry of Finance regarding MiCA requirements and the issuance of licenses are assessed as not meeting the proportionality of the legislation – they want to impose an inadequate, disproportionate burden on business, and moreover, reasonable and realistic deadlines for the implementation of the law are not assessed.
The projects are rushed, unprepared and therefore often lack legal logic.
For example, it is proposed to determine that only VASPs that have obtained the permission of the Bank of Lithuania can operate in Lithuania. However, from a legal point of view, only one day is given to submit applications – the new regulation proposed by the Ministry of Finance would enter into force in 2024. June 30 (Sunday), and the following day, i.e., 2024 July 1 would be the last day to submit applications and all necessary documents. Therefore, if the MiCA regulation, which has not even started to be applied, should be followed, businesses should collect more than 20 different documents, various other business-related information, obtain notary confirmations, apostilles on Sunday, when the Bank of Lithuania is also closed.