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Witnessing the digital breakthrough

The Central Bank of Lithuania To Launch a Blockchain Sandbox in 2019

02 October 2018 14:32, UTC
The Central Bank of Lithuania To Launch a Blockchain Sandbox in 2019
By Denis Goncharenko

Lithuania, or the Republic of Lithuania, is one of the countries in Baltic region. Since 1991, the country is a member of the UN, since 2004 it is a member of the EU and NATO. In May 2018 it entered OECD. Lithuania is a full member of the eurozone and Schengen Agreement. It is also a member of the Nordic Investment Bank, and part of Nordic-Baltic cooperation of Northern European countries. The history of the state is vivid: being the Grand Duchy, a part of Rzeczpospolita, then the Russian Empire and the USSR, in 1990 Lithuania became the first republic to leave the Soviet Union. In 1992, the Constitution of the state was adopted.

The Soviet past left its mark on the economic development of the country. Due to financial instability in the first years of independence, Lithuania's GDP was very low, though subsequently the economy has showed stable growth from 2001 to 2008. In 2009, due to the global economic crisis, Lithuania's GDP fell by 14.7%. It was one of the worst performance indicators in the world. Following that, the state turned to the EU for anti-crisis assistance. Nowadays, Lithuanian government is searching and finding new opportunities for the development of the country.

Here are some interesting facts about Lithuanian economy:

  • According to 2014 data, Lithuania is ranked 17th in the world in the Ease of Doing Business Index prepared by the World Bank Group and 15th in the Index of Economic Freedom, measured by The Heritage Foundation.

  • In 2001, the country became a member of the World Trade Organization and in 2004 joined the EU, which affected the development of foreign trade: from 2006 to 2016, Lithuanian exports and imports of goods increased almost twice.

  • Lithuania is a country with a poor raw material base — it imports all major fuels and energy: oil, natural gas and coal.

  • The share of foreign capital in the total capital of the banking sector is about 90%. More than 95% of all foreign direct investment in Lithuania comes from European Union countries.

The central bank is the Bank of Lithuania. It is a member of the European system of central banks and some decisions in the field of banking regulation are made at the level of the European Central Bank (ECB). There are nine commercial banks that hold a license from the Bank of Lithuania. The country has increasingly sought position itself as the EU's main fintech hub. In 2017 only, 35 FinTech companies came to Lithuania – as a result of Lithuanian government and Bank of Lithuania simplified procedures for obtaining licences for the activities of e-money and payment institutions.

Key milestones in the development of Lithuanian crypto industry:

In September 2013, it became known that some taxi services in Lithuania accept payment in Bitcoins.

In October 2017, the Bank of Lithuania announced that the financial market participants (FMP) should not be associated with the crypto industry. The banks were strongly recommended not to conduct transactions with the virtual currencies.

In November 2017, the Ministries of Finance of the Baltic Republics signed an agreement on the joint development of the DLT technology market.

January 2018. Europe’s first international Blockchain Centre launched in Vilnius in 2018.

In the same month, the Bank of Lithuania announced it's intentions to create a blockchain ‘sandbox’ platform service called LBChain. It is expected that the platform will be launched in 2019.

On 6 March 2018, the Central Bank of Lithuania announced the release of a first collectible digital currency dedicated to the 100th anniversary of the country's independence.

On 15 April 2018, it became known that the Central Bank changed the rhetoric regarding the crypto industry: a round-table discussion was held, with the people from the banking sector, ICO people, as well as FNTT officials.

On 11 June 2018, the Ministry of Finance of Lithuania released a document called “ICO Guidelines”, which was designed to regulate the cryptocurrency industry and the ICO.

In September 2018, in an interview with Bitnewtoday.com, Vilius ŠAPOKA, the Minister of Finance of the Republic of Lithuania, announced the forthcoming amendments concerning the regulation of crypto industry. According to the minister, the amendments will be released in 2019.

The summary of the ICO Guidelines, published on 11 June 2018

The document cannot be interpreted as part of the current legislation, it contains references to laws that can be applied in certain cases. Possible precedents are also listed in the guidelines. The document consists of four parts, each of which provides definitions and lists the actions of laws and regulations:

  • ICO Regulation,

  • Taxation,

  • Accounting,

  • AML/CTF

ICO Regulation
ICO launch is not regulated by specific legislation yet, but as there are various ICO models and different characteristics of tokens, such activity may be subject to the requirements of the legislation of the Republic of Lithuania and supervision of the Central Bank.

Taxation
The various types of taxes and the application are described, including corporate income tax, personal income tax, VAT. Mining is allocated to a separate category of activity, as is the calculation of the tax.

Accounting
Within this section, the tokens are defined as the reasons why this token should be assigned to one or another category. It is indicated how they should be presented in the profits/loss statements.

AML/CTF
This is a short chapter that sends users to 5th AML Directive of April 19. It is indicated that the regulators are preparing a number of amendments to update the legislation.

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