30 Indian Minds Leading the AI Revolution

Lithuania aims to tighten crypto regulation and ban anonymous accounts

Lithuania is planning to tighten anti-money laundering and anti-terror financing regulations on crypto

Published: Jun 10, 2022 04:35:17 PM IST

Image: Shutterstock

On Wednesday, Lithuania's local Ministry of Finance announced that it would introduce regulations to prevent money laundering and terrorism financing in the crypto market.

The Lithuanian government said it would increase its surveillance over crypto to combat money laundering threats and possible schemes by Russian elites to escape financial sanctions.

According to the local Ministry of Finance, multiple ministries of the Lithuanian government adopted law adjustments to Anti-Money Laundering (AML) and counter-terrorism financing in the crypto sector. If passed by the Seimas, Lithuania's legislature, the current law's revisions would tighten user identification rules, and anonymous accounts would no longer be allowed.

The regulations would further tighten requirements for exchange operators, requiring them to register as a corporate body with at least 125,000 euros in nominal capital by January 1, 2023. The senior management of such organisations would have to be comprised of permanent residents of Lithuania.

The announcement justified the move in light of the growing crypto industry and the associated geopolitical risks. It said, "More nuanced regulation of the suppliers of crypto-services is also important considering the international regulatory tendencies and the geopolitical situation in the region when many Western countries impose financial and other sanctions on Russian Federation and Belarus."

Lithuania's Minister of Finance, Gintarė Skaistė, mentioned in her official statement that the national procedures are in compliance with the future pan-European regulations. The announcement highlights the rapid rise of the country's crypto enterprises following a regulatory tightening in neighbouring Estonia — there were only eight new crypto companies in 2020, but 188 new organisations appeared in 2021.

In September 2021, Estonia announced a modification to the AML act. Non-custodial software wallets and decentralised finance products would immediately be prohibited under the revised law. The European Parliament passed an AML legislation package in April 2022, which could result in extreme transparency requirements for transactions between non-custodial wallets and crypto exchanges in the European Union.

A Ministry of Finance spokesperson stated that the new mandate is not intended to shut down multinational crypto firms but to emphasise the importance of good business strategies and following regulations. They also stated, "The new requirement for crypto companies to have a senior manager that would be a permanent resident of Lithuania is orientated towards better communication with supervisory institutions and ensuring the connection to the local market."

The spokesperson also informed that the draft legislation has yet to be approved by the parliament. The law's amendments are set to take effect on November 1, 2022. Most main clauses would go into force on January 1, 2023.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash