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Latvia

Retail_Trading_Status

Allowed-Regulated Unknown
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Analysis ID
#508
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Created
2025-06-26 13:16
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Executive Summary

In Latvia, individual citizens and residents are legally permitted to buy, sell, and hold cryptocurrencies. The regulatory environment is evolving, driven primarily by the EU's Markets in Crypto-Assets Regulation (MiCA), which Latvia is implementing through its national Law on Crypto Asset Services, effective June 30, 2024. Latvijas Banka (the Bank of Latvia) is the primary supervisory authority, overseeing crypto-asset service providers (CASPs) and their licensing. AML/KYC requirements are robust, and income from crypto transactions is subject to personal income tax, though recent amendments provide tax exemptions for non-residents trading publicly traded crypto assets.

Key Pillars

The primary regulator is the Bank of Latvia, responsible for licensing and supervising crypto-asset service providers (CASPs). Core compliance requirements include robust AML/KYC procedures, with the 'Travel Rule' implemented since July 1, 2021, mandating the collection and sharing of originator and beneficiary information for crypto transactions. CASPs must obtain a license from the Bank of Latvia, involving detailed submissions regarding operations, governance, and compliance programs.

Landmark Laws

  • Markets in Crypto-Assets Regulation (MiCA): An EU regulation that Latvia is actively implementing, establishing a unified framework for cryptocurrency asset activities.
  • Law on Crypto Asset Services: Came into force on June 30, 2024, and became applicable to CASPs from December 30, 2024. This law designates Latvijas Banka as the licensing and supervisory authority for crypto assets and aligns Latvian legislation with MiCA.
  • Fifth Anti-Money Laundering Directive (AMLD5): Although an EU directive, its implementation in Latvia resulted in the 'Travel Rule,' effective July 1, 2021, requiring CASPs to collect and share information on crypto transactions.
  • Amendments to the Personal Income Tax Law: Adopted to exempt non-residents from income tax on the disposal of publicly traded crypto assets from January 1, 2025, to December 31, 2027.

Considerations

  • Legal Classification: Cryptocurrencies are not considered legal tender in Latvia; the Euro is the official legal tender.
  • Tax Treatment: Income from cryptocurrency transactions is generally considered capital gains and subject to personal income tax. Non-residents are exempt from income tax on the disposal of publicly traded crypto assets between January 1, 2025, and December 31, 2027.
  • Risks and Concerns: Latvian authorities have issued warnings regarding the risks of cryptocurrency investments, particularly concerning fraud. The Financial and Capital Market Commission (FCMC) has highlighted that some digital currencies are not fully regulated, leading to potential scams.
  • Operational Considerations: Private parties can agree to settle contracts using cryptocurrencies, but transactions must be reported in Euros for tax purposes.

Notes

  • Historical Context: Latvia's regulatory approach has evolved from general financial and AML laws to specific crypto-focused legislation to align with EU-wide efforts, culminating in the Law on Crypto Asset Services.
  • Future Plans: Latvijas Banka is actively engaging with potential market participants and offering pre-licensing consultations, indicating a commitment to fostering a compliant crypto ecosystem.
  • Transitional Provisions: Crypto-asset service providers operating before December 30, 2024, and supervised by the State Revenue Service for AML purposes, could continue operations without a MiCA license until June 30, 2025, if they applied for authorization by that date.
  • AML Supervision: The State Revenue Service previously supervised crypto-asset service providers in the AML field.

Detailed Explanation

Individual citizens and residents in Latvia are legally permitted to buy, sell, and hold cryptocurrencies, subject to a developing regulatory framework. This framework is primarily driven by the European Union's Markets in Crypto-Assets Regulation (MiCA), which Latvia is in the process of fully implementing. The national Law on Crypto Asset Services, effective June 30, 2024, and applicable to crypto-asset service providers (CASPs) from December 30, 2024, establishes the Bank of Latvia (Latvijas Banka) as the primary supervisory authority for the sector. This law aligns Latvian legislation with MiCA, creating a unified licensing regime for CASPs.

CASPs operating in Latvia must obtain a license from the Bank of Latvia, submitting detailed information about their operations, governance, and compliance programs. Companies operating before December 30, 2024, and supervised by the State Revenue Service for AML purposes, could continue operations without a MiCA license until June 30, 2025, provided they applied for authorization by that date. The Bank of Latvia actively engages with potential market participants, offering pre-licensing consultations.

Latvia has robust Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations that apply to CASPs, including customer due diligence (CDD), Know Your Customer (KYC) procedures, ongoing transaction monitoring, and reporting suspicious activities to the Financial Intelligence Unit (FIU). The 'Travel Rule' has been implemented since July 1, 2021, requiring CASPs to collect and share information on the originators and beneficiaries of crypto transactions. The Bank of Latvia has also expanded its guidelines on AML and sanctions risk management to include specific advice for institutions dealing with crypto-assets.

Income from cryptocurrency transactions for individuals is generally considered capital gains and is subject to personal income tax. The Latvian State Revenue Service (SRS) has issued guidelines on the taxation of digital currency transactions, requiring taxpayers to report crypto transactions and maintain supporting documentation for at least five years. Losses from crypto transactions can be offset against profits within the same taxation year. Amendments to the Personal Income Tax Law were adopted to exempt non-residents from income tax on the disposal of publicly traded crypto assets for a three-year period (January 1, 2025, to December 31, 2027) to promote the development of the crypto-asset market in Latvia.

Latvian authorities have issued warnings regarding cryptocurrency investments, particularly concerning fraud. The Financial and Capital Market Commission (FCMC), now integrated into the Bank of Latvia, previously highlighted that some digital currencies were not fully regulated, leading to potential scams. The Consumer Rights Protection Centre monitors advertising, especially for high-yield crypto products. The Bank of Latvia's approach under MiCA includes enhancing consumer protection measures.

Cryptocurrencies are not considered legal tender in Latvia; the Euro is the only official legal tender. However, private parties can agree to settle contracts using cryptocurrencies, provided the transactions are ultimately reported in Euros for tax purposes.

Latvia's approach to cryptocurrency regulation has evolved from general financial laws and AML directives to specific crypto-focused regulation. Amendments to AML laws in 2017 brought virtual currency service providers under monitoring requirements. The country has been progressively aligning with EU-wide efforts, culminating in the adoption of the Law on Crypto Asset Services to implement MiCA. The Bank of Latvia's proactive stance in providing guidance and pre-licensing consultations indicates a commitment to fostering a compliant crypto ecosystem.

Summary Points

Latvia: Retail Cryptocurrency Trading Regulatory Status (as of 2025-06-26)

I. General Status:

  • Allowed-Regulated: Individual citizens and residents are legally permitted to buy, sell, and hold cryptocurrencies.

II. Key Regulatory Bodies:

  • Bank of Latvia (Latvijas Banka):
    • Primary supervisory authority for the crypto sector.
    • Responsible for licensing and overseeing Crypto-Asset Service Providers (CASPs).
    • Provides guidance and pre-licensing consultations to CASPs.
    • Integrated functions of the Financial and Capital Market Commission (FCMC).
  • State Revenue Service (SRS):
    • Responsible for taxation of cryptocurrency transactions.
    • Issues guidelines on the taxation of digital currency transactions.
  • Financial Intelligence Unit (FIU):
    • Receives reports of suspicious activities from CASPs.
  • Consumer Rights Protection Centre:
    • Monitors advertising, especially for high-yield crypto products.

III. Key Legislation and Regulations:

  • EU Markets in Crypto-Assets Regulation (MiCA):
    • Latvia is in the process of fully implementing MiCA.
    • Provides a unified framework for cryptocurrency asset activities.
  • Law on Crypto Asset Services (Latvian National Law):
    • Came into force on June 30, 2024, and became applicable to CASPs from December 30, 2024.
    • Establishes Latvijas Banka as the licensing and supervisory authority.
    • Aligns Latvian legislation with MiCA.
  • Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) Regulations:
    • Apply to CASPs.
    • Include Customer Due Diligence (CDD), Know Your Customer (KYC) procedures, transaction monitoring, and reporting suspicious activities.
  • Personal Income Tax Law:
    • Governs the taxation of income from cryptocurrency transactions.

IV. Requirements for Compliance (CASPs):

  • Licensing:
    • CASPs must obtain a license from the Bank of Latvia.
    • Licensing involves submitting detailed information about operations, governance, and compliance programs.
    • Companies operating before December 30, 2024, and supervised by the State Revenue Service for AML purposes, could continue operations without a MiCA license until June 30, 2025, provided they applied for authorization by that date.
  • AML/KYC:
    • Implement robust AML/CTF programs.
    • Conduct CDD, including KYC procedures.
    • Monitor transactions and report suspicious activities to the FIU.
    • Comply with the "Travel Rule" (implemented since July 1, 2021): collect and share information on originators and beneficiaries of crypto transactions.
    • Undergo quarterly AML audits.
  • Capital Requirements:
    • Maintain paid-up share capital.
  • Supervision Levy:
    • Pay an annual supervision levy tied to gross revenue.

V. Notable Restrictions and Limitations:

  • No Legal Tender Status: Cryptocurrencies are not legal tender in Latvia; the Euro is the only official legal tender.
  • Taxation: Income from cryptocurrency transactions is generally considered capital gains and is subject to personal income tax (25.5% when crypto is sold and fiat currency is received in return).
  • Investor Warnings: Authorities have issued warnings regarding the risks associated with cryptocurrency investments, particularly concerning fraud.

VI. Recent Developments and Changes:

  • MiCA Implementation: Latvia is actively implementing MiCA, creating a unified licensing regime for CASPs.
  • Law on Crypto Asset Services: Came into effect in 2024, designating Latvijas Banka as the licensing authority.
  • Tax Exemption for Non-Residents: Amendments to the Personal Income Tax Law exempt non-residents from income tax on the disposal of publicly traded crypto assets for a three-year period (January 1, 2025, to December 31, 2027) to promote the development of the crypto-asset market.
  • Bank of Latvia Guidance: The Bank of Latvia has expanded its guidelines on AML and sanctions risk management to include specific advice for institutions dealing with crypto-assets.
  • Pre-Licensing Consultations: Latvijas Banka offers pre-licensing consultations to guide potential market participants through the application process.

Full Analysis Report

Report on Retail_Trading_Status in Latvia

Date: 2025-06-26

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).

Retail_Trading_Status

Identified Status: Allowed-Regulated

Detailed Narrative Explanation:

Individual citizens and residents in Latvia are legally permitted to buy, sell, and hold cryptocurrencies. This activity is subject to a developing regulatory framework, primarily driven by the European Union's Markets in Crypto-Assets Regulation (MiCA), which Latvia is in the process of fully implementing. The national Law on Crypto Asset Services, which came into force on June 30, 2024, and became applicable to crypto-asset service providers (CASPs) from December 30, 2024, establishes the Bank of Latvia (Latvijas Banka) as the primary supervisory authority for the sector. This law aligns Latvian legislation with MiCA, creating a unified licensing regime for CASPs.

Regulatory Environment:

  • Licensing: Crypto-Asset Service Providers (CASPs) operating in Latvia must obtain a license from the Bank of Latvia. The licensing process involves submitting detailed information about the company's operations, governance, and compliance programs. Companies that were operating before December 30, 2024, and were supervised by the State Revenue Service for AML purposes, could continue operations without a MiCA license until June 30, 2025, provided they applied for authorization by that date. The Bank of Latvia has been actively engaging with potential market participants, offering pre-licensing consultations to guide them through the application process.
  • AML/KYC Requirements: Latvia has robust Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations that apply to CASPs. These obligations include customer due diligence (CDD), including Know Your Customer (KYC) procedures to identify and verify customers and their beneficial owners, ongoing monitoring of transactions, and reporting suspicious activities to the Financial Intelligence Unit (FIU). The "Travel Rule" has been implemented since July 1, 2021, requiring CASPs to collect and share information on the originators and beneficiaries of crypto transactions. The Bank of Latvia has also expanded its guidelines on AML and sanctions risk management to include specific advice for institutions dealing with crypto-assets.
  • Taxation: Income from cryptocurrency transactions for individuals is generally considered capital gains and is subject to personal income tax. The Latvian State Revenue Service (SRS) has issued guidelines on the taxation of digital currency transactions. Taxpayers are required to report their crypto transactions and maintain supporting documentation for at least five years. Losses from crypto transactions can be offset against profits within the same taxation year. Recently, amendments to the Personal Income Tax Law were adopted to exempt non-residents from income tax on the disposal of publicly traded crypto assets for a three-year period (January 1, 2025, to December 31, 2027) to promote the development of the crypto-asset market in Latvia.
  • Investor Protection and Warnings: While fostering innovation, Latvian authorities have also issued warnings regarding the risks associated with cryptocurrency investments, particularly concerning fraud. The Financial and Capital Market Commission (FCMC), whose functions have now been integrated into the Bank of Latvia, previously highlighted that the issuance and circulation of some digital currencies were not fully regulated, leading to potential scams. The Consumer Rights Protection Centre also monitors advertising, especially for high-yield crypto products. The Bank of Latvia's approach under MiCA includes enhancing consumer protection measures.
  • Legal Tender Status: Cryptocurrencies are not considered legal tender in Latvia; the Euro is the only official legal tender. However, private parties can agree to settle contracts using cryptocurrencies, provided the transactions are ultimately reported in Euros for tax purposes.

Historical Background and Nuance:

Latvia's approach to cryptocurrency regulation has evolved. Initially, there was no specific crypto-focused regulatory framework, with general financial laws and AML directives being the primary guiding principles. Amendments to AML laws in 2017 brought virtual currency service providers under monitoring requirements. The country has been progressively aligning with EU-wide efforts, culminating in the adoption of the Law on Crypto Asset Services to implement MiCA. This positions Latvia as a jurisdiction aiming for a regulated and transparent crypto market, seeking to attract crypto businesses while ensuring financial stability and investor protection. The Bank of Latvia's proactive stance in providing guidance and pre-licensing consultations indicates a commitment to fostering a compliant crypto ecosystem.

Specific, Relevant Text Excerpts:

  • Coinfomania (June 23, 2025): "Latvia's fast-moving fintech sector and early alignment with the EU Markets in Crypto-Assets Regulation (MiCA) have made Riga a serious contender for crypto startups that want single-market access... every would-be Crypto-Asset Service Provider (CASP) must keep paid-up share capital, undergo quarterly AML audits, and pay an annual supervision levy tied to gross revenue."
  • Coinfomania (June 23, 2025): "Legal tender. Crypto-assets are not legal tender, but private parties may settle contracts in bitcoin, ether, or stable-coins—provided the underlying obligations are ultimately reported in euros for tax. Licensing perimeter – Ten activities trigger a licence: custody, trading-platform operation, fiat-to-crypto exchange, crypto-to-crypto exchange, order execution, placement, order transmission, advice, portfolio management, and transfer services."
  • Tetra Consultants (referencing MiCA and Latvian Law):. > Secur­ing a Latvia Cryp­tocur­ren­cy License is cru­cial for nav­i­gat­ing the expand­ing world of cryp­tocur­ren­cy assets in Latvia. The EU’s Mar­kets in Cryp­to Assets (MiCA) Reg­u­la­tion estab­lish­es a uni­fied frame­work for cryp­tocur­ren­cy asset activ­i­ties, and 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.
  • NJORD Law Firm (updated January 10, 2025): "In Latvia, capital gains from cryptocurrency trading are subject to a 25.5% personal income tax. This tax from cryptocurrency applies when crypto is sold and fiat currency is received in return."
  • CMS Law (referencing the Crypto-Asset Service Law): "Based on the transitional provisions of the Crypto-Asset Service Law this law entered into force on 30 June 2024, but it is applicable to crypto-asset service providers from 30 December 2024. Crypto-asset services providers that have (will be) started their operations until 30 December 2024 and are supervised in the AML field by the State Revenue Service may provide crypto-asset services without authorization until 30 June 2025."
  • Scorechain (regarding Travel Rule): "Latvia implemented the Travel Rule in compliance with the European Union's AMLD5 (Fifth Anti-Money Laundering Directive). The rule officially came into effect on July 1, 2021, providing CASPs with the time needed to adjust their internal processes to meet compliance requirements."
  • Latvijas Banka (September 2, 2024, invitation to pre-licensing consultations): "On 30 December, the new Markets in Crypto-Assets Regulation (MiCA) will come into effect, introducing a unified legal framework and a unified licensing regime for the crypto-asset industry across the European Union (EU). Latvijas Banka will accept applications and issue licences for crypto-asset service providers starting from January 2025."

Direct, Accessible URL Links to Sources:

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Search queries used (8)
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