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Concerns that the “exponential growth” of cryptocurrency exchanges and other virtual asset service providers, or VASPs, in Lithuania could fuel financial crime have prompted officials in the Baltic nation to fast-track legal reforms.

Speaking at the ACAMS Baltics Symposium in Vilnius on Thursday, Finance Minister Gintare Skaiste told an audience of compliance officers that nearly 230 virtual asset services providers, or VASPs, have set up shop in Lithuania over the past 15 months, marking a dramatic spike from the 23 total VASPs that called the country home just two years ago.

“Naturally, the growth of the sector brings additional risks, from money laundering to fraud,” Skaiste said. “We’re taking proactive steps domestically with the aim of adapting the national regulatory framework to changing realities.”

Plans to amend the nation’s Law on the Prevention of Money Laundering and Terrorist Financing are on track to pass through the Lithuanian Parliament this year, said Skaiste, who described the reforms as a “quick fix” to bolster oversight of cryptocurrency until 2025, when the EU’s Markets in Crypto Assets Regulation, or MICA, comes into force.

The amendments would raise minimum capital requirements for cryptocurrency firms from €2,500 to a yet-to-be-determined amount and open the government’s registers of authorized VASPs to the public. VASPs would have to appoint a director within Lithuania and ensure that a certain proportion of their clients reside in the country.

In its current form, the EU’s MICA bill would place the cryptocurrency sector under rules designed to prevent market abuse, enhance financial stability and protect investors.

The legislation, which is still the subject of negotiations between the European Commission, European Parliament and the bloc’s 27 national governments, would also introduce a fully fledged licensing regime for VASPs to supplement the current, EU-required system of registration that individual nations have taken wildly different approaches in implementing.

Lithuania currently requires VASPs to register as a company with the State Enterprise Centre of Registers and also declare themselves and provide basic details of their compliance programs to the country’s financial intelligence unit, the Financial Crime Investigation Service, which supervises them for anti-money laundering purposes.

“Lithuania’s approach [to cryptocurrency supervision] has been very relaxed,” a compliance officer with a local exchange told ACAMS moneylaundering.com on condition of anonymity. “They’ve done the bare minimum.”

The cryptocurrency industry’s sudden growth in Lithuania follows tougher enforcement in Estonia, where officials have stripped more than 1,400 VASPs of their licenses over the past two years.

Around 400 VASPs had permission to operate in Estonia as of October, but Matis Maeker, the country’s FIU chief, told moneylaundering.com that he expects the total to drop further in line with his nation’s efforts to reduce its exposure to financial crime.

Skaiste, Lithuania’s finance minister, said Thursday that her government would give the FIU more personnel and IT resources to supervise the cryptocurrency industry, and more broadly to enhance the country’s anti-money laundering framework amid unprecedented western sanctions against Russia.

“We will live in sanction-heavy reality for some time,” she told attendees of the conference in Vilnius. “Now, more than ever … it is vital to have an effective and comprehensive domestic regime for implementing EU and international sanctions, closing all possible loopholes for circumvention.”

Baltic regulators on Thursday also discussed the patchwork of rules and supervisory arrangements that characterize the EU’s cryptocurrency market.

While Latvia and Lithuania have tasked their FIUs with supervising the sector, in Latvia, where only a handful of VASPs have registered, the responsibility falls to tax authorities.

Contact Koos Couvée at kcouvee@acams.org