Lithuania is preparing to introduce strict licensing rules for cryptocurrency firms by the year 2025. This move is expected to greatly reduce the number of companies permitted to operate within the country.

According to Simonas Krepsta, a board member of the central bank, the goal is to establish strong oversight for the industry as digital assets become more integrated into the financial system.

Currently, around 580 firms are operating in Lithuania, but it is unlikely that most will be able to meet the requirements for the new license. Only a limited number of crypto companies are predicted to obtain full permits, which will be significantly lower than the current amount.

The process for obtaining a license is set to be completed by June 2025, and companies that fail to secure licenses will be required to leave the Lithuanian market.

Starting in July, the Bank of Lithuania will begin a pre-assessment process for licensing. Some firms with existing licenses from other EU states may be exempt from applying for the new license.

With the tightening of regulations, the central bank also plans to improve its employees’ understanding of different crypto business models. These measures are in response to the challenges faced by the crypto industry in loosely regulated environments and are aimed at preventing the unregulated growth of crypto companies in the country.

Krepsta highlighted the need for stronger oversight by referring to various cases of failures and financial crimes in the US, Europe, and Lithuania.

Over the past ten years, Lithuania has become known as a flourishing hub for financial technology, attracting many FinTech startups, such as Revolut, which obtained a banking license in the country.

This decision by Lithuania aligns with a global trend, as many countries, including Singapore, Hong Kong, and Dubai, have recently implemented extensive regulatory frameworks for digital assets.

Additionally, the EU is preparing to launch its first unified crypto legislation, known as the Markets in Cryptoassets (MiCA), which is expected to come into effect in January 2025.