The Bank of Lithuania, being the supervisory authority and issuer of financial licenses to banks and other credit institutions, on 31st of January, 2014, had published a warning to consumers about potential risks that virtual currencies entail. Recently, on 14th of February, 2019, the Bank of Lithuania has renewed its position on virtual assets and initial coin offerings, reflecting changing market realities.
The position is intended for existing and potential financial market participants (hereinafter – FMPs), as well as entities intending to organize initial offerings of virtual asset coins (hereinafter – coins or tokens) or to provide the possibility for Lithuanian investors to invest in this product type.
The term virtual currency, which was used in the previous version of the position, has been substituted with the term virtual assets. The position defines how and when virtual assets may be used for payment, specifies when and how FMPs may set up investment funds for investment in virtual assets, as well as addresses other relevant issues. The underlying principles of the position, however, have remained unchanged: FMPs should not participate in activities or provide services associated with virtual assets and they should also ensure separation of their activities from activities associated with virtual assets. Although FMPs are still prohibited from receiving payments in virtual assets, the position provides for the possibility of using third-party services. Payments to a FMPs account can only be made in FIAT currencies. Seeking to ensure a level playing field for all FMPs, the updated position allows creating investment funds intended for professional investors that would invest in virtual assets. Such funds are prevalent in other countries. Having completed the notification process, their investment units may be marketed in Lithuania. The position states that FMPs are not allowed to accept virtual assets with the obligation to repay them with or without interest. Given the emergence of new market models, FMPs are also prohibited from issuing virtual asset loans or accepting virtual assets as collateral, except for cases where virtual asset tokens are considered to be securities.
Taking into account the relevance of the matter to FMPs and seeking to shape a single practice for FMPs with regard to the separation of their financial service activities from activities associated with virtual assets, the Bank of Lithuania presented the criteria and requirements, which should be observed, but shall not apply if FMPs carry out activities related to security tokens that are legally considered to be securities and are subject to the requirements, regulating the issuance, distribution and trading of securities as well as other related activities.
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