Can a payment system (EMI PSP) work with cryptocurrency? Considering Lithuania

Today, the payment industry is very closely connected with a cryptocurrency business. The cryptocurrency market is beneficial both for large companies and for startup projects, because the ability to have capital in different countries of the world that does not depend on local currencies makes the virtual currency industry popular.

Different jurisdictions have different cryptocurrency regulation positions. For example, Singapore, Germany, Cyprus and Malta actively stimulate their turnover, China and Russia set significant restrictions, and in Bolivia, Thailand and Vietnam there is a direct ban on operations with cryptocurrencies. Nevertheless, most countries adhere to the position of neutrality.

Lithuania – a new ecosystem for fintech business

Today, Lithuania is a leader in the EU in promoting financial technology; over the current year, the number of companies operating in the field of financial technology has increased by 40 percent. However, there is still no special regulation of cryptocurrencies in Lithuania. The Lithuanian authorities claim that in the near future a regulatory framework will be developed for the cryptocurrency business.

Taking into account that Lithuania takes the first place in the number of licensed electronic money institutions in Europe, we contacted the National Bank of Lithuania to answer a question that concerns many customers: is it possible to work with cryptocurrencies with an electronic money or PSP license.
The SBSB team decided to once again focus your attention on the position of Lithuania in cryptocurrency regulation.

Position of the National Bank of Lithuania: The participants in the financial market cannot engage in activities related to virtual assets.

According to Lithuanian legislation, participation in activities related to virtual assets does not apply to financial services, therefore the provision of such services by financial market participants may lead to a refusal to issue or revoke a license.

The activities related to virtual assets is defined as the acquisition, storage or sale of virtual assets, the organization of an ICO, the execution of operations in virtual assets, the management of virtual asset accounts, the activity of exchanging or investing in virtual assets, unless it is considered as an investment in financial instruments.

A financial market participant has the right to create tools intended only for professional investors.

It should be noted that market participants can use blockchain technology in their activities and have a small amount of virtual assets, but this should not be related to the nature of their financial services.

A financial services company cannot accept payments for services in cryptocurrency.

Since the companies with financial licenses are under the supervision of the Bank of Lithuania, they are forbidden to directly accept payments in virtual assets, in order to do so they must use the services of third parties. Payments to the accounts of financial market participants can only be made in fiat currencies.

Such companies are not allowed to provide conditions for payment for virtual assets using payment instruments issued by a financial market participant. For example, prepaid, debit or credit cards. It is forbidden to issue loans for virtual assets or to accept them as collateral if they are not considered as securities.

The issuer may issue electronic money using blockchain technology if it complies with the requirements stipulated by Lithuanian Law on Electronic Money and Electronic Money Institutions. Please note that when providing financial services to customers, a market participant must ensure that third-party services related to virtual assets (website, mobile application, platform, ATM, client email, etc.) are limited by risk (for example, customer identification, limited movement of virtual assets).

Thus, the basic principles of cryptocurrency regulation in Lithuania have remained unchanged: the participants in the financial market should not provide services related to virtual assets. They must ensure that their activities are separated from those associated with virtual assets. The legislation still does not allow market participants to receive payments using virtual assets, but does not prohibit the use of third-party services. The innovation is that it was allowed to create investment funds intended for professional investors who would invest in virtual assets.