Licencing of Crypto-asset Service Providers (CASPs)

Companies entering the crypto-asset market may face various challenges arising from the evolving regulatory landscape and the complexity of the cryptocurrency industry. It thus becomes important to comprehend crypto-asset licensing requirements within the operational jurisdiction and to seek guidance from legal experts who focus on the issues of cryptocurrency regulation, in particular on the upcoming implementation of the new Regulation on the Markets in Crypto-Assets (MiCAR) in 2024.

Glimstedt has an experienced team of legal experts who are ready to advise its clients on all issues pertaining to crypto-assets.

CASP Licence under MiCAR 

Effective 30 December 2024, companies in Lithuania may apply for a CASP licence if they intend to engage in the following activities, which include:

• carrying out crypto-asset orders for their clients
• placing crypto-asset orders
• receiving and transmitting crypto-asset orders for their clients
• advising about crypto-assets
• providing crypto-asset portfolio management services
• providing crypto-asset transfer services for their clients
• providing crypto-asset custody and administration services for their clients
• exchanging crypto-assets for traditional funds
• exchanging crypto-assets for other digital assets
• operating a crypto-asset trading platform

In order to apply for such license, a company must provide documents proving its compliance with the MiCAR requirements. It means that the company must meet the minimum share capital requirement and needs to be established in an EU member state. Its governing bodies and shareholders must be of impeccable reputation, and at least part of its senior executives must be permanent residents of Lithuania. In addition to that, the company must have either a one-tier management structure (a board of directors) or a two-tier management structure (a board of directors and a supervisory board) to ensure its proper governance. If the one-tier management structure is used, there must be non-executive members on the company’s board of directors to ensure objective decision-making.

The CASP’s staff is required to meet a sufficient threshold for qualification, thus the company must have an internal policy designed to assure proper supervision of such qualification. Also, the company must ensure that not only its financial resources, but also its non-financial resources are sufficient to provide the relevant customer service. This implies the necessity to have an organizational structure that assures not only high-quality service, but also sufficient quantity of employees.

Further to the above, each CASP must take appropriate measures to protect its clients’ proprietary rights and to prevent any possible use of the clients’ cryptocurrency for its own account, including the use of customer funds. For example, it is necessary for the company to have all such customer funds deposited to a credit institution. In the event that crypto-asset custody and administration services are provided by the company or commissioned from other CASPs, all providers of such services must be licensed under MiCAR. In addition, each company is required to maintain prudential safeguards of at least the higher amount of a required permanent minimum capital or one-quarter of the fixed overheads of the preceding year (to be reviewed annually).

It is also noteworthy that all CASPs are required to operate in compliance with the legal and regulatory requirements as regards money laundering and terrorist financing.

All companies operating in Lithuania under the CASP licence will be granted a transitional period until 1 June 2025, to obtain an EU-level licence under MiCAR.

Glimstedt may offer extensive legal services to help new CASPs get off to a smooth start in the Lithuanian market.

Virtual Asset Service Provider (VASP) Authorization 

Under the previous legal framework, companies in Lithuania could apply for a Virtual Asset Service Provider (VASP) authorization for the following activities:

• Cryptocurrency Exchange Operator’s activity, which allowed the exchange of cryptocurrency for fiat currency and vice versa, and the exchange of one virtual asset for another.
• Cryptocurrency Depository Wallet Operator’s activity, which allowed the custody and management of clients’ cryptocurrency depository wallets for virtual assets.

No simplified procedure or any additional transitional period to obtain the CASP licence will be granted to such authorized VASPs. Requirements applicable to them will be the same as those to be complied with by any newcomer to the market.

Requirements for Asset Referenced Token (ART) and Electronic Money Token (EMT) Issuers

No license is required for EMT issuers under MiCAR, although there are certain requirements that need to be fulfilled. First, EMTs may only be issued by licensed credit institutions or electronic money institutions. Second, the issuer must prepare a whitepaper, submit it to the Bank of Lithuania along with the marketing communication, and publish it. Although the Bank of Lithuania does not require the whitepaper to be pre-approved, the information contained there must be accurate, clear, not misleading, and in line with the MiCAR requirements.

Contrary to the above, licensing of ART issuers depends on the issuer type. If ARTs are offered to the public by a separate legal entity other than a credit institution, a license under MiCAR will be required. On the other hand, credit institutions deliberating to issue ARTs need to obtain approval by the Bank of Lithuania. For that purpose, they must submit notification, i.e., a whitepaper and other documents (identical to those required to be provided under MiCAR) necessary for the Bank of Lithuania to make its decision. The Bank of Lithuania assesses the submitted information and issues such approval if it finds the submitted notification to be sufficient.

MiCAR to Ensure a Level Playing Field  

MiCAR is aimed at introducing a harmonized framework for the crypto-asset market at the EU level.

Companies that offer one or more crypto-related services to their clients on a professional basis will be subject to the licensing procedure enabling them to provide innovative crypto-based financial products.

Companies licensed under MiCAR will be able to offer crypto-related services across the EU with just one licence.

Services

Our legal services include:

• • Legal assessment of the proposed crypto-related activity
  • Assistance with getting the VASP license
  • Assistance with going through the CASP licencing process
  • Incorporation of legal entities
  • Full-scope assistance with the preparation of documents required by the competent Lithuanian authorities for the licensing process
  • Legal support for token offerings (ICO/STO/IEO).