Lithuania’s central bank joins a growing global list of financial institutions to issue guidance for ICO (initial coin offering) fundraisings in the country.
The Bank of Lithuania has revealed its official position on cryptocurrencies in the financial industry and ICOs, the trendy new form of fundraising powered by cryptocurrencies in a 4-page notice[PDF] approved the central bank’s board.
Putting the spotlight on ICO, an “increasingly popular method of attracting capital” as explained by the authority, central bank board member Marius Jurgilas stated:
Notwithstanding the fact that such activities are not regulated, in their essence, they are the raising of funds from investors, often unprofessional, to finance some activity. Since the risk of losing investors’ funds and other risks are particularly high, our position is that such offering, in certain cases, should be subject to investment-related legislative requirements and restrictions.
More specifically, offerings of tokens that bear similarities with traditional securities will require the ICO organizer to issue a prospectus approved by the country’s securities regulator, putting the token under the purview of Lithuania’s securities laws. Similarly, laws on crowdfunding and collective investment undertakings would determine the offering’s ‘secondary market or the formation of a financial market participant’s capital,” the authority said.
Cryptocurrencies’ Banking Ban
Deeming virtual currencies as “high risk” instruments, the central bank has explicitly forbidden financial institutions from engaging any virtual currency related activity. Financial market participants who provide financial services to customers transacting in cryptocurrencies are subjected to ‘strict compliance with the requirements for the prevention of money laundering and terrorism financing,” read an official notice from the central bank.
“Financial services must be clearly dissociated from activities related with virtual currencies,” the announcement read. “Banks, payment institutions and other financial market participants should not provide services associated with virtual currencies or participate in their release.”
In statements, Jurgilas said the move is to protect retail customers from volatility that “may lead to significant losses of funds.”
The official added:
[I] n order to protect the customers of financial institutions, financial institutions legally operating in our country and supervised by the Bank of Lithuania must strictly dissociate themselves from this product type in their activities. An illusion that virtual currencies are supervised or safe can in no way be created.