Lithuania plans to implement stringent licensing requirements for crypto firms by 2025, aiming to significantly reduce the number of companies permitted to operate within the country. According to Simonas Krepsta, a board member of the central bank, this move is intended to establish robust oversight as digital assets become increasingly integrated into the financial system.

Krepsta mentioned in an interview with Bloomberg on April 3 that there are currently 580 active firms in Lithuania, but it is unlikely that most will successfully obtain the new license. He noted that the number of crypto companies meeting the comprehensive criteria for full permits will be much lower than the current registrations. The licensing process is slated to conclude by June 2025, and companies failing to secure licenses will be required to exit the Lithuanian market.

The Bank of Lithuania will commence a pre-assessment procedure for licensing in July, with some firms already authorized to operate in the EU potentially exempt from applying for the new license. Additionally, the central bank will focus on enhancing its staff's comprehension of crypto business models.

This tightening of regulations responds to the challenges posed by the lightly regulated environment of the crypto industry, aiming to curb the unregulated expansion of crypto firms in the country. Krepsta pointed out various instances of failures, embezzlements, and other financial crimes across the US, Europe, and Lithuania, underscoring the necessity for more robust oversight.

Over the past decade, Lithuania has established itself as a thriving FinTech hub, attracting numerous financial technology startups, including well-known names like Revolut, which obtained its banking license in the country. This initiative by Lithuania aligns with a global trend, with several countries, including prominent financial centers like Singapore, Hong Kong, and Dubai, implementing extensive regulatory frameworks for digital assets in recent years. Additionally, the EU is on the verge of enacting its first unified crypto legislation, the Markets in Cryptoassets (MiCA), scheduled to come into effect in January 2025.