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Latvia

Retail_Trading_Status

Allowed-Regulated Unknown
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Analysis ID
#128
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Archived
Created
2025-04-12 06:48
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Live

Executive Summary

Retail trading of cryptocurrencies is legally permitted in Latvia, but is now subject to comprehensive EU-harmonized regulatory and licensing under MiCA. The Bank of Latvia (Latvijas Banka) is the national competent authority, supervising Crypto-Asset Service Providers (CASPs) under MiCA, with authorization required for various crypto-asset services as of December 30, 2024. A key focus is AML/CFT compliance, driven by the 'Crypto-Asset Service Law' (Kriptoaktīvu pakalpojumu likums) implementing MiCA. A transitional period allows existing VASPs to continue operations until June 30, 2025, provided they apply for a license.

Key Pillars

  • Primary Regulator: Bank of Latvia (Latvijas Banka) is the national competent authority responsible for authorizing and supervising Crypto-Asset Service Providers (CASPs) under the MiCA framework.
  • Core Compliance: Stringent AML/CFT and KYC requirements are enforced for CASPs, including compliance with the EU's updated Transfer of Funds Regulation (Travel Rule).
  • Licensing/Registration: Entities providing crypto-asset services must obtain authorization from Latvijas Banka, with a transitional period for existing VASPs registered with the SRS before December 30, 2024.

Landmark Laws

  • Markets in Crypto-Assets (MiCA) Regulation (EU No. 2023/1114): Took effect on December 30, 2024; provides a comprehensive EU-wide regulatory framework for crypto-assets and related services.
  • Crypto-Asset Service Law (Kriptoaktīvu pakalpojumu likums): Entered into force on June 30, 2024, with requirements becoming applicable from December 30, 2024; implements MiCA in Latvia and designates Latvijas Banka as the competent authority.
  • Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing: Latvia's AML/CTF law applicable to VASPs, requiring registration with the State Revenue Service (SRS), CDD/KYC, risk assessments, internal controls, and reporting of suspicious transactions.

Considerations

  • Cryptocurrencies are recognized as a contractual means of payment or a type of digital asset, not legal tender.
  • Latvia aims to be a Fintech and crypto hub.
  • MiCA-regulated crypto-assets can be used for share capital payments.

Notes

  • Latvia initially had a relatively open stance towards cryptocurrencies, which has evolved significantly.
  • Latvijas Banka began accepting licensing applications on January 2, 2025.
  • Transitional period for VASPs operating before December 30, 2024, allowing them to continue operations until June 30, 2025, if they apply for a license by that date.
  • Latvia offers pre-licensing consultations through Latvijas Banka to guide CASPs through the MiCA authorization process.

Detailed Explanation

In Latvia, individual citizens and residents are legally permitted to engage in retail cryptocurrency trading, encompassing buying, selling, and holding cryptocurrencies. While not considered legal tender, cryptocurrencies are recognized as a contractual means of payment or a form of digital asset. The regulatory landscape has evolved significantly, particularly with the implementation of the EU's Markets in Crypto-Assets (MiCA) Regulation. Previously, Latvia lacked a specific national framework dedicated solely to cryptocurrency businesses, unless the crypto-asset qualified as a financial instrument under the Financial Instrument Market Law. However, entities providing virtual currency services, such as exchanges (Virtual Asset Service Providers or VASPs), were subject to Latvia's anti-money laundering and counter-terrorism and proliferation financing (AML/CTF) laws, specifically the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing, even before MiCA. These VASPs were required to register with the State Revenue Service (SRS), conduct customer due diligence (CDD, including Know Your Customer - KYC procedures), perform risk assessments, establish internal controls, and report suspicious transactions.

The regulatory environment experienced a major shift with the EU-wide implementation of MiCA. Latvia has transposed MiCA's requirements into national law through the “Crypto-Asset Service Law” (Kriptoaktīvu pakalpojumu likums), which took effect on June 30, 2024, with requirements applicable from December 30, 2024. This law designates the Bank of Latvia (Latvijas Banka) as the national competent authority responsible for authorizing and supervising Crypto-Asset Service Providers (CASPs) under the MiCA framework. As of December 30, 2024, any entity wishing to provide crypto-asset services in Latvia – including operating trading platforms, exchanging crypto for fiat or other crypto, providing custody, executing orders, placing crypto-assets, providing advice, or managing portfolios – must obtain authorization from Latvijas Banka. Latvijas Banka began accepting licensing applications on January 2, 2025.

A transitional period exists for VASPs that were already operating and registered with the SRS before December 30, 2024. These providers can continue their operations without a MiCA license until June 30, 2025, provided they submit a license application to Latvijas Banka by that date. The MiCA regulation and Latvia's implementing law reinforce stringent AML/CFT and KYC requirements for CASPs. Compliance with the EU's updated Transfer of Funds Regulation (the "Travel Rule"), which mandates the collection and sharing of originator and beneficiary information for crypto transfers, is also required.

Latvia aims to position itself as a fintech and crypto hub within the EU, offering pre-licensing consultations through Latvijas Banka to guide CASPs through the MiCA authorization process and adopting competitive supervisory fees. Recent amendments also allow the use of MiCA-regulated crypto-assets for share capital payments in Latvian companies. In summary, while retail trading of cryptocurrencies is permitted in Latvia, the service providers facilitating these activities are now subject to a comprehensive EU-harmonized regulatory and licensing regime under MiCA, supervised by Latvijas Banka, with a strong emphasis on AML/CFT compliance.

Summary Points

Here's a bullet-point summary of the report on Retail Cryptocurrency Trading Status in Latvia, designed for quick comprehension:

Retail Cryptocurrency Trading Status in Latvia: Summary

I. Overall Regulatory Status:

  • Allowed-Regulated: Retail trading of cryptocurrencies is permitted but heavily regulated.
  • Cryptocurrencies are recognized as a contractual means of payment or a type of digital asset, not legal tender.

II. Key Regulatory Bodies:

  • Bank of Latvia (Latvijas Banka):
    • National competent authority for authorizing and supervising Crypto-Asset Service Providers (CASPs) under MiCA.
    • Responsible for issuing licenses and overseeing crypto-asset operations.
    • Offers pre-licensing consultations to guide CASPs through the MiCA authorization process.
  • State Revenue Service (SRS):
    • Previously responsible for registering Virtual Asset Service Providers (VASPs) under AML/CTF laws.
    • VASPs registered with SRS before Dec 30, 2024, have a transitional period.

III. Important Legislation and Regulations:

  • EU Markets in Crypto-Assets (MiCA) Regulation:
    • The primary law governing crypto-asset service providers in Latvia.
    • Requirements became applicable on December 30, 2024.
  • Crypto-Asset Service Law (Kriptoaktīvu pakalpojumu likums):
    • Latvia's national law implementing MiCA.
    • Entered into force on June 30, 2024, with requirements applicable from December 30, 2024.
  • Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing (AML/CTF Law):
    • VASPs were subject to this law even before MiCA.
  • EU Transfer of Funds Regulation ("Travel Rule"):
    • Mandates the collection and sharing of originator and beneficiary information for crypto transfers.

IV. Requirements for Compliance (CASPs):

  • Licensing:
    • Any entity providing crypto-asset services (exchanges, custody, advice, etc.) must obtain authorization from Latvijas Banka as of December 30, 2024.
    • Latvijas Banka began accepting licensing applications on January 2, 2025.
  • AML/CFT:
    • Establish robust AML and CFT policies.
    • Implement effective Know Your Customer (KYC) procedures.
    • Ensure transparent reporting and audit trails.
    • Report unusual and suspicious transactions.
  • Risk Assessment: Conduct and document risk assessments.
  • Internal Controls: Establish an internal control system.
  • Technical Security: Maintain a secure and resilient technological framework.
  • Travel Rule: Comply with the EU's Transfer of Funds Regulation.

V. Notable Restrictions or Limitations:

  • Cryptocurrencies are not considered legal tender.
  • Strict licensing requirements for CASPs under MiCA.
  • Stringent AML/CFT and KYC requirements.

VI. Recent Developments or Changes:

  • MiCA Implementation: Latvia has fully implemented MiCA into national law.
  • Latvijas Banka Supervision: Latvijas Banka is now the primary supervisor for CASPs.
  • Transitional Period: VASPs operating before December 30, 2024, can continue operations until June 30, 2025, if they apply for a MiCA license by that date.
  • Fintech Hub Ambition: Latvia aims to position itself as a fintech and crypto hub within the EU.
  • Share Capital Payments: Recent amendments allow the use of MiCA-regulated crypto-assets for share capital payments in Latvian companies.

Full Analysis Report

Report: Retail Cryptocurrency Trading Status in Latvia

Date: April 12, 2025

Analyst: Financial Regulatory Analyst AI

Topic: Retail_Trading_Status

Description: Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

1. Current Status: Allowed-Regulated

2. Detailed Narrative Explanation:

In Latvia, individual citizens and residents are legally permitted to buy, sell, and hold cryptocurrencies. Cryptocurrencies are not considered legal tender but are recognized as a contractual means of payment or a type of digital asset [5, 20]. While initially met with a relatively open stance, the regulatory environment has significantly evolved, particularly with the implementation of the European Union's Markets in Crypto-Assets (MiCA) Regulation.

Historically, Latvia did not have a specific national framework or licensing regime dedicated solely to cryptocurrency businesses, unless the specific crypto-asset qualified as a financial instrument under the Financial Instrument Market Law [2]. However, entities providing virtual currency services, such as exchanges (referred to as Virtual Asset Service Providers or VASPs), were subject to Latvia's anti-money laundering and counter-terrorism and proliferation financing (AML/CTF) laws (Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing) even before MiCA [2, 4, 15]. These VASPs were required to register with the State Revenue Service (SRS), conduct customer due diligence (CDD, including Know Your Customer - KYC procedures), perform risk assessments, establish internal controls, and report suspicious transactions [2, 9, 13, 15].

The regulatory landscape underwent a major transformation with the EU-wide implementation of MiCA. Latvia has transposed MiCA's requirements into national law through the "Crypto-Asset Service Law" (Kriptoaktīvu pakalpojumu likums), which entered into force on June 30, 2024, with its requirements becoming applicable from December 30, 2024 [2, 7, 9, 13]. This law designates the Bank of Latvia (Latvijas Banka) as the national competent authority responsible for authorizing and supervising Crypto-Asset Service Providers (CASPs) under the MiCA framework [2, 3, 13, 21].

As of December 30, 2024, any entity wishing to provide crypto-asset services in Latvia – including operating trading platforms, exchanging crypto for fiat or other crypto, providing custody, executing orders, placing crypto-assets, providing advice, or managing portfolios – must obtain authorization from Latvijas Banka [3, 7, 11]. Latvijas Banka began accepting licensing applications on January 2, 2025 [10, 18, 22].

A transitional period exists for VASPs that were already operating and registered with the SRS before December 30, 2024. These providers can continue their operations without a MiCA license until June 30, 2025, provided they submit a license application to Latvijas Banka by that date [2, 9, 23].

The MiCA regulation and Latvia's implementing law reinforce stringent AML/CFT and KYC requirements for CASPs [7, 13]. Compliance with the EU's updated Transfer of Funds Regulation (often called the "Travel Rule"), which mandates the collection and sharing of originator and beneficiary information for crypto transfers, is also required [3].

Latvia has shown ambition in positioning itself as a fintech and crypto hub within the EU, offering pre-licensing consultations through Latvijas Banka to guide CASPs through the MiCA authorization process and adopting competitive supervisory fees [6, 8, 10, 18, 22]. Recent amendments also allow the use of MiCA-regulated crypto-assets for share capital payments in Latvian companies [22].

In summary, retail trading of cryptocurrencies is permitted in Latvia, but the service providers facilitating these activities are now subject to a comprehensive EU-harmonized regulatory and licensing regime under MiCA, supervised by Latvijas Banka, with a strong emphasis on AML/CFT compliance.

3. Specific Relevant Text Excerpts:

  • On Legality and Initial Status: "The position of the Bank of Latvia and the State Revenue Service is that cryptocurrency is a contractual, not statutory, means of payment that can be used in transactions of exchange. Cryptocurrency cannot be considered as official currency or legal tender because the issuance and use of these instruments remain unregulated and they are not linked to any national currency." [5] (Note: While issuance was unregulated, MiCA now regulates issuance and services).
  • On Pre-MiCA AML Regulation: "As of now, crypto-asset service providers are subjects of the AML Law, meaning that they are required to (i) register with the State Revenue Service as subjects of the AML Law... (ii) conduct and document risk assessment; (iii) establish an internal control system; (iv) report unusual and suspicious transactions. In essence, crypto-asset service providers are subject to the same money laundering regulations as any other subject of the AML Law." [2]
  • On MiCA Implementation and Regulator: "The primary law governing crypto-asset service providers in Latvia is Regulation (EU) No. 2023/1114 [MiCA], which will take effect on December 30, 2024... Latvia has seamlessly integrated this into its own regulations through the Law on Cryptocurrency Asset Services. This legislation designates Latvijas Banka as the authority responsible for issuing licenses and overseeing cryptocurrency asset operations within the country." [13] (Slight correction: MiCA itself took effect, the Latvian law implements/supplements it).
  • On Licensing Requirement: "A legal person whose occupation or business is the provision of one or more crypto-asset services to customers on a professional basis, and that has been accordingly authorised to provide crypto-asset services by Latvijas Banka in line with Regulation (EU) 2023/1114, is entitled to provide crypto-asset services. Please note that the requirements of Regulation (EU) 2023/1114 for issuing authorisation to provide crypto-asset services will apply as of 30 December 2024." [3]
  • On Licensing Start Date: "As of 2 January, Latvijas Banka, the central bank of Latvia, is officially accepting applications for the EU MiCA licence." [10]
  • On Transitional Period: "CASPs [Crypto-asset service providers], which started providing services before December 30, 2024, have the right to continue providing cryptoasset services until June 30, 2025 without obtaining a permit from the Bank of Latvia... CASP has until June 30, 2025 to apply for a permit." [9]
  • On AML/KYC under New Regime: "Key compliance obligations include: Establishing robust AML and CFT policies. Implementing effective Know Your Customer (KYC) procedures. Ensuring transparent reporting and audit trails. Maintaining a secure and resilient technological [framework]." [7]

4. Source URLs:

  • [2] CMS Expert Guide to Crypto Regulation in Latvia: https://cms.law/en/int/expert-guides/cms-expert-guide-to-crypto-regulation/latvia (Accessed via Google Search Cache)
  • [3] Latvijas Banka - Crypto-asset service providers: https://www.bank.lv/en/participant-supervision/fintech/crypto-assets/crypto-asset-service-providers (Accessed via Google Search Cache)
  • [4] PILnet - Latvia Crypto Guide for Charities: https://pilnet.org/resource/latvia-cryptocurrency-and-nfts-guide-for-charities/ (Accessed via Google Search Cache)
  • [5] Freeman Law - Latvia and Cryptocurrency: https://freemanlaw.com/latvia-cryptocurrency-laws/ (Accessed via Google Search Cache)
  • [6] Brave New Coin - Latvia Fast-Tracks MiCA Implementation: https://bravenewcoin.com/insights/latvia-fast-tracks-mica-implementation-positioning-as-crypto-hub (Accessed via Google Search Cache)
  • [7] EU LAW FIRM - Crypto-Licensing in Latvia: https://eulawfirm.eu/crypto-license-in-latvia/ (Accessed via Google Search Cache)
  • [8] Binance News - Latvia Prepares For MiCA Compliance: https://www.binance.com/en/square/post/2024-09-09-latvia-prepares-for-mica-compliance-with-pre-licensing-consultations-1016833897159 (Accessed via Google Search Cache)
  • [9] Manimama - MiCA implementation in Latvia: https://manimama.io/blog/mica-implementation-in-latvia/ (Accessed via Google Search Cache)
  • [10] Latvijas Banka News - Accepting MiCA Licence Applications: https://www.bank.lv/en/news/press-releases/13953-latvijas-banka-now-accepting-applications-for-eu-mica-licence (Accessed via Google Search Cache)
  • [11] Scorechain - Latvia MiCA: https://www.scorechain.com/blog/mica-regulation-latvia/ (Accessed via Google Search Cache)
  • [13] Tetra Consultants - Latvia Cryptocurrency License: https://www.tetraconsultants.com/registrations/cryptocurrency-license/latvia/ (Accessed via Google Search Cache)
  • [15] Sumsub - AML Regulations in Latvia: https://sumsub.com/blog/aml-regulations-in-latvia-must-read-for-fintechs/ (Accessed via Google Search Cache)
  • [18] Latvijas Banka News - Pre-licensing Consultations: https://www.bank.lv/en/news/press-releases/13779-latvijas-banka-invites-crypto-asset-service-providers-to-pre-licensing-consultations (Accessed via Google Search Cache)
  • [20] Financial Crime Academy - Cryptocurrency In Europe: https://financialcrimeacademy.org/cryptocurrency-in-europe-the-adequate-laws-and-regulations-of-cryptocurrency-in-europe/ (Accessed via Google Search Cache)
  • [21] EUR-Lex - ECB Opinion on Latvian Draft Law: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52024AB0011 (Accessed via Google Search Cache)
  • [22] Labs of Latvia - Binance MiCA License Rumours: https://labsoflatvia.com/en/news/is-binance-really-considering-obtaining-a-mica-license-in-latvia (Accessed via Google Search Cache)
  • [23] Ellex Legal - Crypto-asset service providers move: https://ellex.legal/en/insights/crypto-asset-service-providers-are-on-the-move-to-find-their-residence-will-latvia-make-the-shortlist/ (Accessed via Google Search Cache)

End of Report

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