Lithuania to Ban Anonymous Wallets As Government Tightens Crypto Restrictions

Amid the geopolitical tensions, institutions within the European Union have been expediting processes to regulate cryptocurrencies.

This is “in consideration of the increasing number of the crypto asset and service providers across Europe, global financial challenges, increased money laundering activities, and possible financing of terrorism associated with virtual currencies”, according to the Lithuanian government. 

Against this backdrop, the Lithuanian government is moving to seriously regulate cryptocurrencies and how they are traded, with the view to limit money laundering and prevent sanctioned entities from dodging financial sanctions, according to Lithuania’s finance ministry.

As of Thursday, June 9, the Finance Ministry was set to enforce strict regulations on crypto exchanges and outrightly ban anonymous wallets. This comes amidst a recent hike in money laundering cases and convictions in the Baltic country.

Legislation to Ban Non-Custodial Wallets Being Considered 

The new regulations put together by the Ministry have been sent to parliament and are currently under consideration. If passed, the revision to the existing laws will tighten the rules around user identification and ban anonymous accounts. According to parliamentarians, this move is in anticipation of future European Union directives on crypto and finance regulation.

The law demands, among other things, that crypto exchanges operating in Lithuania require their managerial staff to be permanent residents of Lithuania. Identification of users through Know Your Customer (KYC) measures would also be mandatory. The Lithuanian Register of Legal Entities is also expected to be made public.

The proposed bill also seeks to increase legal requirements for the registration of exchanges. Beginning on January 1, 2023, these exchanges will have to register as a corporate organization with a minimum nominal capital of €125,000.

Tightening The Screws on Crypto Regulation

This move by Lithuanian authorities is the latest in a series of regulatory activities imposed by government authorities worldwide on cryptocurrencies. With respect to Lithuania, the appetite for regulation is being bolstered as the European Union moves to entrench sophisticated regulations around crypto service providers.

Since Estonia moved to pass similar regulations earlier this year, the number of crypto exchanges in Lithuania has increased dramatically. 

FCIS To Intensify Its  Searchlight? 

In view of geo-economic efforts to mitigate the risks posed by the services of crypto asset providers, the Financial Crime Investigation Service (FCIS) is expected to intensify its inspections of these providers.

Last month, the European Parliament approved regulations against anonymity in the cryptocurrency industry. This move is expected to complicate transactions between crypto service providers and non-custodial wallets.