Lithuania’s Central Bank Issues Updated Position On Cryptocurrencies And ICOs

News, Regulation | February 18, 2019 By:

The Bank of Lithuania, the country’s central bank, has updated its position on cryptocurrencies and initial coin offering (ICO) to ensure a level playing field for all financial market participants (FMP).

The central bank’s position, which is intended for existing and potential FMPs as well as entities conducting ICOs, has substituted the term virtual currency, which was used in the previous version of the position, with “virtual asset.” It defines how and when virtual assets may be used for payment, specifies when and how financial market participants may set up investment funds for investment in virtual assets, as well as addresses other relevant issues.

According to the bank, the updated position will allow FMPs to create investment funds intended for professional investors that would invest in virtual assets. The bank said such funds are prevalent in other countries, having completed the notification process, their investment units may be marketed in Lithuania.

The central bank, however, noted that FMPs should not participate in activities or provide services associated with virtual assets. They should also ensure separation of their activities from activities associated with virtual assets. While FMPs are still prohibited from receiving payments in cryptocurrencies, the updated position will allow them to use third-party services.

“Financial market participants are not allowed to accept virtual assets with the obligation to repay them with or without interest,” the bank said. “Given the emergence of new market models, financial market participants 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).”

The bank said that the updated position has taken into account current market developments and evolving regulatory regimes, adding that they will review the position on a regular basis, upon assessment of financial market developments.