Central Bank of Latvia's Pre-Licensing Consultations for Crypto Firms

In response to the phased implementation of the European Union (EU) Markets in Crypto-Assets Regulation (MiCA), the Central Bank of Latvia introduced a pre-licensing consultation service for local crypto-asset service providers (CASPs) in the country, according to an August 29 press release.

As part of Latvia's efforts to align with MiCA, the initiative provides free guidance to companies looking to operate within the framework, helping them prepare for the formal licensing process that will begin in January 2025.

The Central Bank of Latvia's pre-licensing consultation program is designed to support crypto businesses by offering expert advice on regulatory compliance, documentation requirements, and preliminary readiness assessments.

Companies interested in acquiring MiCA-compliant licenses can request unlimited consultations. This allows them to clarify regulations, address compliance concerns, and comprehensively prepare before officially submitting their applications in 2025. Similarly, experts from the central bank will provide tailored guidance, ensuring CASPs meet the necessary regulatory standards under MiCA.

This proactive measure seeks to smooth the transition for firms, allowing them to enter the Latvian market confidently.

Latvia's Growing Crypto Market and Regulatory Landscape

Latvia's pre-licensing consultations are part of a broader effort to develop a robust crypto ecosystem. In June 2024, the country advanced its "Crypto Asset Services Law," providing a clear regulatory framework to support the growth of blockchain and crypto-related businesses.

In addition, the Latvian authorities have taken a firm stance on ensuring regulatory compliance. In July, the country's financial crimes unit fined Payeer, a crypto payment service provider, $10 million for violating EU sanctions related to Russia.

Similarly, the Central Bank of Latvia has been integrating artificial intelligence (AI) and cloud technology into its operations, further aligning with the EU's broader digital finance strategy.

However, Latvia's future crypto market also faces some challenges. In August 2023, the central bank released a survey that indicated a massive decline in crypto asset investment, with a 50% drop over the past year.

The survey attributed this decline to several factors, including fraud and insolvency involving major market participants, misguided investments, and concerns over crypto's association with money laundering.

Based on payment card usage data, the survey showed that only 4% of the Latvian population purchased crypto assets in February 2023, compared to 8% in the same period in 2022.