Lithuania To Adopt Strict Crypto Exchange Regulations Requiring Mandatory ID Checks


Lithuania is preparing to adopt new regulations to govern the crypto exchanges operating in the country that requires the exchanges to prove the identity of the clients.

In efforts to comply with the EU Anti-Money Laundering Directive, the country’s finance ministry has finalized its plans to fully formalize crypto-based exchanges, Cointelegraph reports.

Going Beyond The EU Requirements

The small European nation which is a real token economy hub, is set to implement legal changes that are likely to burden companies in the crypto and fintech sector with more obligations. The new regulations are part of the efforts by Lithuanian authorities to enhance its control over virtual currencies and step up oversight of the economy built around them.

On wednesday, Lithunian Parliament okayed the move but a time frame for implementation remains uncertain.

Under the new rules, companies dealing with digital assets in the country must be registered with the country’s Center of Registers. The companies will also be required to adopt comprehensive know your customer (KYC) and anti-money laundering procedures. According to the new rules, exchanges will be expected to inform the Financial Crime Investigation Service (FCIS) about larger transfers.

The requirements will cover not only operations involving fiat money but also crypto-to-crypto transactions. Companies that act as intermediaries in these deals will be responsible for ensuring compliance with Lithuania’s Law on the Prevention of Money Laundering and Terrorist Financing. That means they will be required to check the identity of their clients before providing any services.

According to the new rules transactions above €1,000 ($1,127) involving cryptocurrency, whether being converted to or out of fiat or from one crypto to another, must adhere to stringent reporting requirements. The crypto exchange or similar enterprise must gather every identity details of the buyer. In addition, large transactions of over €15,000 ($16,919) requires the exchanges to report to Lithuania’s Financial Crime Investigation Service.

Different rules will be applicable to token issuers in the country or the initial coin offerings. In this case, ID details will be required if the sale passes €3,000 ($3,383).

The director of financial market policy department in the ministry of finance, Sigitas Mitkus, explained the intentions of the government:

“We want to create a transparent legal environment for virtual currency exchanges, depository wallet operators and ICO initiators. We also want to contribute to ensuring better consumer protection.”

He said that the implementation of the new regulations will allow Lithuania to comply with the fifth EU Anti-Money Laundering Directive (AMLD 5).

The official boasted that the implementation of the new regulations will make Lithuania to be among the first countries in the world to implement the FATF [Financial Action Task Force] recommendations.

If the law is fully implemented as it is, local residents will not be able to benefit from cryptocurrency services provided by companies based outside Lithuania, as it states that only entities registered in Lithuania will be allowed to serve Lithuanian clients.

Lithuania is not the only Baltic nation to contemplate stringent measures to govern the crypto space. Estonia, is another Baltic nation with a host of numerous crypto based companies that is planning to tighten the licencing regime in the industry. One of the new rules under consideration states that foreign entities licensed in Estonia will have to comply with the requirement to maintain an office there.

Will the strict regulations in Lithuania affect the growth rate of crypto industry in Europe and the world in general? Share your opinion with us in the comments section.

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