Regulation
Lithuania Ready to Lead the European Security Token Revolution
The Baltic country of Lithuania seeks to become a major hub for security token activity across Europe. The country continues to welcome security token investments into their border with favorable regulations. In June, the country's Minister of Finance, Vilius Sapoka, issued cryptocurrency and ICO guidelines. These helped Lithuania solidify its position as a top crypto country in Europe.
Lithuania managed to accomplish increased security token investment through a combination of factors. The Lithuanian Finance Ministry has long supported FinTech advancements. The country provides leadership in advanced IT infrastructure and alternative methods of accessing financing for startups.
In the About US section of Lithuania's new crypto guidelines, Sapoka refers to the blockchain technology as a “phenomenon” that “cannot be ignored.” He also discussed the importance of minimizing the impact of this technology on the stability of current markets and reducing the ability of nefarious groups to use the technology to fund their organizations. Sapokja ends the section with a lighthearted joke referencing Lithuania as “#Litechnia.”
ICO & Crypto Guidelines
The Minister of Finance broke these guidelines down into four specific areas of importance. The four mentioned categories are regulation, taxation, accounting, and anti-money laundering (AML) / Combating Financing Terrorism (CFT).
Lithuania ICO Guidelines via Ministry of Finance
Regulatory
This section begins with a description of an initial coin offering (ICO). The guidelines go into an explanation of security tokens. According to the guidelines, you are subject to securities regulations if your tokens:
- Grant rights to the company management process.
- Entitle token holder to a share in company profits.
- Offer interest on the investment.
- Promise redemption for costs through token sales.
Those organizations that offer security tokens will be required by the Bank of Lithuania to provide name, brand, financial information, platform structure, and management environment prior to approval.
Taxation
The taxation section describes the asset class of cryptocurrencies. Here, the guidelines describe cryptocurrency as the same as fiat currency for the purpose of regulation. Additionally, the section states that certain types of tokens can fall under additional tax laws depending on their use. There is also a brief section on corporate vs personal crypto tax filing.
Interestingly, the guidelines place miners out of the taxation zone. That is unless they provide their mining services to others. Miners are tax exempt on the sale of mined cryptocurrency as well.
Accounting
This section explains how ICO earnings should be accounted for. Token owners can learn how to claim their earnings depending on the type of token they issue. In the opening section, token issuers learn how to record their earning in the profit/loss statement.
AML / CFT
In this text, it is explained that Lithuania plans to amend their AML and CFT laws to include virtual currency. It lists exchanges and wallets as the first area to receive amendment.
First STO
Lithuania is officially the first country in Europe to host a security token offering (STO). The DESICO project claims the title as the first EU STO and it is of significant importance that the developers behind the project choose Lithuania as their base. In a public interview, developers pointed out Lithuania's strong framework and ICO regulations as the reason for choosing the country.
Bitcoin Baltics
Lithuania's strong pro crypto stance makes the country an attractive option for blockchain investment firms. Lithuanian officials recognized the demand for more crypto regulation and made the necessary framework to facilitate growth. Now the country is poised to pioneer the security token revolution.
