Lithuania is home to one of the biggest numbers of crypto companies in the EU. Some of them raise suspicions of being used for money laundering and criminal activities.
In October 2022, Estonian law enforcement, together with the United States Federal Bureau of Investigation, detained two people suspected of defrauding more than half a billion euros in a cryptocurrency scheme. One of the biggest fraud schemes in Estonian history, it prompted the country to significantly tighten licensing of cryptocurrency-related activities.
As a result, many “virtual entrepreneurs” moved to Lithuania, according to the central bank.
“We now have over 500 cryptocurrency companies in Lithuania and we are leading in the European Union,” says Gediminas Šimkus, the chief of the Bank of Lithuania. “It’s only that this indicator does not evoke good emotions. On the contrary, it is a signal that we are facing a serious challenge.”
According to the Financial Crimes Investigation Service (FNTT), almost half of these companies have not filed a single transaction report. The FNTT and the Bank of Lithuania believe that cryptocurrencies can be used for money laundering and to finance criminal activities. Moreover, they can be used by Russia and Belarus to circumvent sanctions.
“Physical checks have revealed that there are more than a dozen companies registered at one address. A significant share, as much as a third, have only one or two employees. The shareholders on the above list come from more than 60 countries,” says Rolandas Kiškis, director of the FNTT.
The largest number of shareholders of cryptocurrency companies operating in Lithuania are from Ukraine, the UK and Estonia, according to Kiškis. There are also a few from Russia, they are under investigation.
The country of origin of the shareholders, however, is not the main issue, but who uses the companies’ services.
“We’re getting signals from market consultants who are monitoring traffic on blockchain platforms – they’re really seeing the traffic that’s going on in our companies with third countries, including China, Russia and others,” says Simonas Krėpšta, a board member of the Bank of Lithuania.
“We have seen big collapses in the last year or a year and a half and we see some former FTX executives registering companies in Lithuania, one of Binance branches is in Lithuania,” he adds.
Executives of cryptocurrency business giants such as FTX and Binance have been found guilty of multi-billion-dollar fraud.
Although the European regulation on cryptocurrency markets, which will come into force in 2025, is expected to bring the situation under control, the Lithuanian government has drafted its own legislation that is expected to be passed by the end of the year.
“Until the [EU] regulation comes into force, we need to have the tools at our national level so that our institutions can function and this sector can be regulated and controlled,” says Interior Minister Agnė Bilotaitė.
Crypto companies will be obliged to maintain a capital of at least 125,000 euros. The FNTT could suspend or ban one or several services for breaking the law. Currently, only licensed crypto businesses are subject to such measures.
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