The Bank of Lithuania has issued an official position regarding initial coin offerings (ICOs) and cryptocurrencies, in which the central bank encourages banks to withhold financial services from businesses operating with virtual currencies. Lithuania’s central bank also expressed its belief that ICOs should be regulated as securities.
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According to a press release published by the Bank of Lithuania, “financial market participants should not engage in the sale of virtual currencies, provide conditions for customers to pay in payment instruments issued by them (e.g. debit or credit cards, etc.), execute any operations in virtual currencies, and also engage in their exchange or similar activities.” The statement also states that businesses “should not link their services to virtual currencies and create an impression that such services are supervised and subject to the same security standards as those applicable to financial services are.”
Marius Jurgilas, Member of the Board of the Bank of Lithuania, states that “Virtual currency is an instrument involving high risk, while profiteering on it may lead to significant losses of funds. Therefore, in order to protect the customers of financial institutions, financial institutions legally operating in our country and supervised by the Bank of Lithuania must strictly dissociate themselves from this product type in their activities. An illusion that virtual currencies are supervised or safe can in no way be created.”
The release states that “financial market participants that will provide financial services to customers who offer virtual currencies… will have to ensure strict compliance with the requirements for the prevention of money laundering and terrorist financing.”
The release also articulates Lithuania’s central bank’s position with regards to initial coin offerings. Bank of Lithuania believes that when an ICO exhibits the features of securities, the crowdsale should be subject the juridical requirements of the Law on Securities. The central bank asserts that the pertinent regulations may differ depending upon the particularities of each individual ICO, stating that “when deciding on the application and scope of specific legislation of the Republic of Lithuania for specific ICO, the conditions of the relevant ICO should be analysed and assessed.”
Marius Julius states that “in their essence, [ICOs] are the raising of funds from investors, often unprofessional, to finance some activity. Since the risk of losing investors’ funds and other risks are particularly high, our position is that such offering, in certain cases, should be subject to investment related legislative requirements and restrictions.”
Lithuania’s official position pertaining to cryptocurrencies has changed on several occasions in recent years. In 2014, Bank of Lithuania issued a statement that emphasized the potential risks to investors relating to bitcoin, asserted that bitcoin was not legal tender, and discouraging the nation’s financial institutions from conducting cryptocurrency related operations. In 2016, Lithuania’s Vice-Minister for Economy, revealed that the country’s officials were exploring investing into blockchain and cryptocurrency technologies, stating “we think that technologies such as blockchain, cryptocurrency, and bitcoin are among the latest and most exciting financial innovations. Lithuania… [has] serious intentions to invest into breakthrough[s] in this area and to become a leader on the regional and global scale.”
The recent central bank position suggests that official Lithuanian sentiment regarding virtual currencies has again returned to one of discouragement.
What do you think about Bank of Lithuania’s position with regards to virtual currencies and ICOs? Share your thoughts in the comments section below!
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Do you agree with us that Bitcoin is the best invention since sliced bread? Thought so. That’s why we are building this online universe revolving around anything and everything Bitcoin. We have a store. And a forum. And a casino, a pool and real-time price statistics.Samuel Haig is a cryptocurrency and economics journalist who has been passionately involved in the bitcoin space since 2012. Samuel has written about the disruptive potential of cryptocurrency with regards to the dialectical relations within contemporary neoliberal capitalism.