Lithuania Ends Soft Crypto Oversight With Strict MiCA Push

Source: CryptoTale Original Title: Lithuania Ends Soft Crypto Oversight With Strict MiCA Push Original Link: Lithuania has issued a final warning to crypto firms operating without licenses under Europe’s MiCA framework. From January 1, unlicensed crypto firms will face enforcement action. The Central Bank of Lithuania confirmed that all crypto service providers must secure licenses by December 31. The requirement applies to exchanges, wallet operators, and related platforms.

Authorities stressed that compliance is mandatory, not optional. Firms operating without approval will act outside the law. The move marks a decisive shift away from Europe’s earlier soft compliance phase. Regulators now signal the start of full financial supervision under MiCA rules.

The deadline ends a transitional period granted under European regulation. Lithuania transposed the Markets in Crypto Assets framework into national law. Since then, regulators have warned firms to prepare early. With days remaining, enforcement now takes priority.

Regulators Attach Penalties to MiCA Compliance

Lithuania’s central bank outlined strict consequences for noncompliance. These include fines, website blocking, and criminal prosecution. Authorities will treat unlicensed activity as illegal financial services. Criminal penalties can include prison sentences of up to four years.

The regulator said onboarding new users without a license will violate criminal law. Accepting crypto assets without approval will also trigger penalties. The central bank confirmed it holds enforcement authority. It can restrict access to platforms suspected of illegal operations.

Officials also maintain a public database of unauthorized financial service providers. The bank shares findings with law enforcement agencies. This structure allows faster coordination and investigation. Lithuania now links regulatory breaches directly to criminal enforcement.

The central bank urged firms unwilling to apply for licenses to exit smoothly. It asked companies to inform clients early. Authorities want customers to understand timelines and procedures. They also require clear instructions for transferring funds and crypto holdings.

Dalia Juškevičienė, who leads investment services supervision, addressed operators directly. She said companies must prioritize client protection during wind-downs. Firms should help users move assets to custodians or self-hosted wallets. Regulators want all client assets returned before authorization ends.

Authorities emphasized transparency during closures. They warned against sudden shutdowns. Firms must communicate openly with users. Regulators framed this approach as investor protection under MiCA.

Low Licensing Uptake Signals Industry Shakeout

Despite months of warnings, few firms have applied for licenses. Only about 30 companies submitted applications so far. More than 370 entities remain registered as crypto service providers. However, only around 120 report active operations.

This gap highlights upcoming consolidation pressures. Many firms lack the capital or structure required under MiCA. Licensing demands operational controls, reporting standards, and compliance systems. Smaller platforms may struggle to meet these thresholds.

Lithuania issued guidance to help firms prepare. Regulators said the aim centers on market integrity. They also want stronger investor protections. Authorities see licensing as a filter for serious market participants.

The country has positioned itself as a MiCA gateway. It has promoted regulatory clarity, attracting global crypto firms. Lithuania ranked among the top crypto jurisdictions in recent global reports. However, enforcement now replaces promotional messaging.

This shift aligns with actions across Europe. Spain, France, and Germany have tightened oversight. National regulators now coordinate under MiCA timelines. Regulatory arbitrage opportunities continue to shrink.

Lithuania’s stance offers a preview of Europe’s next phase. Crypto firms now face institutional-grade supervision. Platforms must choose between compliance and exit. Regulators no longer tolerate informal operations.