Lithuania is in the spotlight of the crypto world this year. The European republic claims to enter the vanguard of the countries with most funded ICO projects, according to its Minister of Finance Vilius ŠAPOKA, who also shared the plans of intensive development of legal frameworks and amendments to current laws which are to appear in 2019. Indeed, a lot of support is done in the country, which creates a large blockchain hub and is eager to become the FinTech centre of all Europe.
Despite that, it’s not so cloudless in Lithuania. The ICO business got criticised, and here is why.
On October 3, it became known that the Financial Crime Investigation Service (FNTT) initiated a seminar examining the “threats and potential benefits” of ICOs to the economy of Lithuania. The head of the FNTT, Antonio MIKULSK paid great attention to the problem of “virtual currency having huge cash flows, but there are worries about converting them into dollars and euros as quickly as possible, and leaving virtual currencies as quickly as possible.” The idea of the authority is that this may be a potential fraud and money-laundering issue, and the turnover of virtual currency into fiat is obvious and suspicious.
More than that, the investigations of cryptocurrency trading and crowdfunding are also started by FNTT, with all the transactions of virtual assets to fiat money with the amount of more than €80,000 being closely examined, stated FNTT deputy director Mindaugas PETRAUSKAS. He also paid concerns to the transparency of business: “There are people in Lithuania, who declared to be ICO representatives or cryptocurrency traders. Some, for example, claiming the revenues of more that €6 mln to the tax authorities. They want to pay taxes, and have paid 5%... but who knows what is the source of the capital? No one asks what is the sum of investment.”
“According to the ICO figures, Lithuania is one of the world leaders and shows the 305% growth… In 2017, the volume was €82 mln. Now it is about €500 mln. The question is, where do these money come from, as the amount is very big,” the official also added.
Despite the adopted guidelines, the current situation with ICOs seems to be quite murky. Even the officials of Lithuania look at the volumes of funds from different angles: the Minister of Finance looks very positive at attracting the money to the country, while the FNTT representatives are more critical to the situation. Indeed, what kind of projects are the ones which raised such amounts in Lithuania? One can find it in open sources, the Baltic Fund blog presented a list of ten Lithuanian ICOs to follow in 2018, where we can take a peek at the highlights, and count the numbers. Bankera, Monetha, WePower are included in this top, being the most discussed projects this year.
The situation with Bankera is mostly incomprehensible. This ICO stands out in the Lithuanian list as the most funded this year, raising about €100 mln. If we compare the numbers and resort to simple math, it occurs to be the fifth part of the total amount of raised funds in 2018. This is solid. But what’s next? The project has come under intense scrutiny over poor performance in February already. Later, the Board of the Bank of Lithuania has imposed a fine of €0.5 mln on one of the founders of Bankera, Vytautas Karalevičius, and the affiliated project, the electronic money institution UAB Pervesk (fine imposed: €0.7 mln) for improper risk level assessments and breaching the legal requirements of AML/CFT. The story is far from over. A lot of negative comments take place on different crypto enthusiast boards, such as Bitcointalk and Reddit, where the private investors lament the poor community management, and transparency of project in general.
What’s even more odd in this story, is that the Ministry of Finance of Lithuania stated to Bitnewstoday.com that Bankera no longer operates in the jurisdiction of the republic. So it is quite a controversial situation: Bankera is considered Lithuanian for the volume of raised funds and public relations, but it doesn’t operate under their law now. It seems like double standards, isn’t it? Another interesting question is, where has the project moved to eventually, or where is it heading right now?
So, the worries of officials are not groundless at all. By now, FNTT created a list of virtual assets risks. Mindaugas Petrauskas stated that the proposals for crypto and ICO activity regulations have been forwarded to the Ministry of Finance — the regulation wheel needs to spin even more rapidly in Lithuania.