In an effort to combat money laundering, terrorist financing, and sanctions evasion, Lithuania’s Finance Ministry has banned anonymous wallets and imposed strict regulations on cryptocurrency exchanges. According to the ministry, the move was made in anticipation of future European Union decisions.
Lithuania Bans Self-Hosted Wallets
The Lithuanian government is considering enacting new legislation to tighten crypto regulations and outlaw anonymous wallets.
According to the Ministry of Finance, the government approved amendments to the “Law on the Prevention of Money Laundering and Terrorist Financing” on Wednesday, with the goal of increasing the transparency of the cryptocurrency sector while ensuring its “sustainable further development.” Before being passed into law, the amendments must be approved by the Seimas, Lithuania’s legislature.
The law aims to prohibit the creation of “anonymous accounts,” tighten KYC regulations for crypto exchanges, and require managerial employees of Lithuanian-based exchanges to be permanent residents of Lithuania. The Registrar of Legal Entities will also publish the identities of cryptocurrency exchange operators.
The Finance Ministry justified these measures as an effort to fight crypto money-laundering, terrorist financing, sanctions evasion from Russia and Belarus, and reputational risks for Lithuanian market participants and the state.
Gintar Skaist, Minister of Finance, claimed the government was “taking proactive steps to strengthen regulation at the national level in preparation for subsequent decisions at the [European Union] level.”
Recently, the European Parliament voted to approve anti-anonymity regulations for the cryptocurrency industry, which would significantly complicate transactions between non-custodial wallets and crypto service providers. Many cryptocurrency supporters, including Coinbase CEO Brian Armstrong, have criticised the legislation.
Following Estonia’s tightening of regulations, Lithuania has seen a surge in the number of crypto businesses While there were only 8 crypto companies established in 2020, the Finance Ministry reports that more than 220 new entities have been registered since then.