The central bank of Lithuania has updated its position on cryptocurrencies and tokens issued through initial coin offerings. The regulator has revised the definition of these assets specifying the conditions under which financial institutions can operate with digital money and accept crypto payments.
The Term ‘Virtual Assets’ Replaces ‘Virtual Currency’
The governing board of Bank of Lithuania, the institution responsible for the Baltic nation’s monetary policy and financial markets, has recently released an updated version of its position pertaining to digital currencies. The regulator said it has taken into account the current market developments and evolving regulatory regimes in other jurisdictions.
In an announcement published on its website, Lietuvos Bankas reveals its intentions to provide all existing and potential financial market participants (FMPs) with a “level playing field.” This includes entities organizing initial coin offerings (ICOs) and businesses providing services to Lithuanian residents who want to invest in this type of financial products.
Responding to general questions about cryptocurrencies, the bank now says it has substituted the term “virtual currency,” used previously in regards to digital coins, with “virtual assets.” The new policy introduces strict rules for FMPs and describes under what circumstances they can work with virtual assets, including for payments.
Crypto Funds Open Only to Professional Investors
The financial institution emphasizes, however, that the underlying principles of its position have remained unchanged. Bank of Lithuania notes that companies offering financial services are required to separate their main activities from those associated with virtual assets.
Financial organizations are still not permitted to receive payments directly in cryptocurrency, give out crypto credits or use digital assets as collateral, except when the tokens are considered securities. The payments they accept in their accounts should only be in fiat currency to presumably limit risks associated with digital coins.
On the other hand, the new policy allows these companies to receive cryptocurrency payments processed by third-party platforms that convert the amounts to local fiat. When crypto-related services are provided, risk mitigating measures such as customer identification, limited movement of the virtual assets within the FMP and coverage with traditional assets should be applied.
The central bank’s updated position creates conditions for the registration of investment funds dealing with digital assets. However, these entities will be able to provide services only to professional investors. A number of such funds operate in other countries, the bank says, noting that they can do that in Lithuania too if they comply with the requirements of the country’s legislation and the bank’s guidelines.
Lithuania to Allow Equity ICOs
Lietuvos Bankas has also answered several questions regarding initial coin offerings (ICOs). The regulator stated that equity ICOs can be held via crowdfunding platforms and security tokens can be issued. Such activities are currently governed by country’s crowdfunding and securities laws.
The offering of crypto securities to the public should also comply with the respective EU directives that have been transposed into the Lithuanian legislation. One of the requirements is to indicate the other member states where the tokens will be placed so that the bank can notify local authorities.
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