MiCA Implementation Dilemma in Lithuania: To Have or Not to Have a Transitional Period?

MiCA on the transitional period

The European Union's Markets in Crypto-Assets Regulation (MiCA) is a pivotal development towards setting a unified regulatory framework within the European Union (EU) for regulating and supervising the activities of the crypto-asset market participants. The MiCA foresees optional transitional measure providing Member States the discretion right to decide to not apply or to reduce the 18-month transitional period, during which crypto-asset service providers (CASP) may provide services under their existing national rules.

Ministry of Finance’s proposal on transitional period and licensing in Lithuania

The Ministry of Finance (MoF) took the lead, drafted and submitted for coordination with other authorities a number of draft laws implementing the requirements of the MiCA and the European Union's Funds Transfer Regulation.?

The MoF in its prepared draft laws proposes not to apply the transitional period and to start implementing the MiCA requirements concerning the CASPs from 30 December 2024. The draft laws also propose that the virtual asset service providers (VASP) established in Lithuania will have to submit their applications for MiCA authorization to the Bank of Lithuania no later than 1 July 2024. The VASP shall lose the right to operate if it has not implemented the requirements set out in the MiCA by 30 December 2024.?

Future regulator’s view on transitional period and licensing in Lithuania

The Bank of Lithuania (BoL) was one of the first institutions to provide conclusions on draft legislation, in which it supports the goals pursued by the MoF, but considers that the measures proposed in the draft legislation have significant gaps and may not achieve the desired outcomes. The BoL provides the following key proposals in relation to the draft laws:

• A certain transitional period should be established, which should not be lengthy (e.g. 6 months);
• The licensing process for CASP/VASP under the MiCA should only start from the official application of the MiCA across the EU, i.e. from 30 December 2024;
• Establishment of the pre-assessment process for the licensing applications (non-mandatory), according to which the BoL will be able to provide the applicants with the pre-assessment conclusions on their compliance with the essential conditions set out in the MiCA.

What is next?

Probable that the initiator of the draft laws may be influenced by the arguments and authority of the BoL, which, as the future supervisor of CASPs having extensive experience and expertise in supervising financial market participants, can objectively assess the feasibility of a consistent transition to the MiCA regulatory regime in Lithuania. It is recommended to follow closely the further legislative process and the official decisions to be taken in the context of the submitted conclusions concerning the draft laws.

See the link in the comments for the BoL Conclusions on Draft Legislation