Updated: Sep 26, 2022
Fears of Russian oligarchs using crypto exchanges in Lithuania and Latvia to hide dirty money have compelled both countries to follow Estonia's lead on tighter crypto anti-money laundering regulations.
In a competition that also includes Frankfurt, Paris, Milan, and Vienna, Lithuania and Latvia are hoping to attract the new EU Anti-Money Laundering Authority (AMLA) a lready tightening anti-money laundering measures to drive illicit crypto financiers out of the market has prompted Latvia and Lithuania to tighten their regulatory demands on crypto firms.
The two Baltic states are considering enacting legislation that will closely align with the EU's bill for the crypto asset market, known as MiCA. This is set to be voted on this summer, but it would only take effect in three years across the EU. The Baltics want their own mini-MiCAs up and running as soon as possible.
Meanwhile, in Brussels, efforts are being made to speed up the implementation of MiCA so that it can be in place by the end of 2023, complete with safeguards and a supervisory structure.
Since the start of the war, wealthy Russians have moved just over $62 million worth of cryptocurrency to other online addresses, according to Chainalysis, a blockchain data platform.
Furthermore, President Christine Lagarde of the European Central Bank warned policymakers last month that oligarchs could use cryptocurrencies to avoid sanctions.
Policymakers in Vilnius and Riga are keen to avoid the money laundering scandals of the previous decade, which tarnished the region's anti-money laundering reputation and took years to recover from. Another reason to now concentrate on any AFC threats posed by cryptocurrencies is because of this.
In Lithuania, the number of crypto companies has increased from 20 in 2019 to 252 now.
Gintar Skaist, Lithuania's finance minister, has proposed capital requirements of €125,000 and new transparency measures for all cryptocurrency companies that have or will register in Lithuania.
Companies that operate in the cryptocurrency space will also be required to hire a manager who is based in the country. The rules should go into effect in November if everything goes according to plan.
In Skaistė's comment to POLITICO: "With the increasing numbers of these entities [crypto companies], I think there is an increasing risk of fraud, money laundering” and “maybe some evasion of sanctions regime."
"“Some of these entities … they are just empty shells," Skaistė explained. "And to just keep them like that … I don’t see the reason why it should be like that."We are putting a lot of emphasis and energy on [anti-money laundering] issues
Skaistė stated, "We are putting a lot of emphasis and energy on [anti-money laundering] issues" as well as creating a welcoming environment for fintech.
He revealed, "One of the ideas is to host AMLA in Vilnius."
Meanwhile, Latvia, which is seen as stepping up its game in the AML field by many Member States and officials in Brussels, is seeking to host AMLA.
To avoid attracting compliance evaders from Estonia, it is pursuing a stricter licensing procedure for cryptocurrency firms.
"Baltics is a small region and they might migrate somewhere,," said Līga Kļaviņa, Latvia's deputy state secretary of the finance ministry.
Meanwhile, as the Baltics chart their own path in the crypto space, the industry as a whole is looking for a more coordinated EU approach.
"We are growing concerned with the fragmentation of AML rules across Europe, which not only run counter to the actions at EU level aiming at creating European rules, but [are] also endangering European businesses and jobs," Robert Kopitsch, the secretary-general of Blockchain for Europe, told Politico.
By fLEXI tEAM