New cryptoasset regulation: good news for industry, but also expenses and additional red tape

On June 13, the Saeima adopted the Crypto Asset Services Law, implementing the European Regulation (EU) 2023/1114 on crypto asset markets (MiCA). Member states must implement this regulation by December 2024, introducing new restriction systems for crypto asset markets in Europe.

This regulation applies to various crypto assets, including tokens and stablecoins that are pegged to an asset such as fiat money (EUR, USD) or securities (stocks, bonds). For comparison: Bitcoin is a crypto asset, but it is not pegged to any asset.

The regulation aims to ensure transparency and prevent fraudulent transactions, but it also creates additional control and tracking opportunities. It imposes greater responsibility on issuers, service providers, and grants more rights to consumers, promoting state control over crypto asset markets. The new rules include strict anti-money laundering (AML) and customer due diligence (KYC) requirements, meaning that crypto asset service providers who do not already do so will need to conduct detailed customer checks and report suspicious transactions.

There are several companies in Latvia that are directly or indirectly related to cryptocurrencies, but not all of them will become subjects of this law, except in cases where they qualify as crypto asset issuers or direct service providers.

Compliance with the new requirements can incur significant costs, especially for small and medium-sized enterprises (SMEs), such as in obtaining permits and adapting information systems. Stricter regulatory requirements may reduce innovation and competition in the market, which could be part of a broader strategy to restrict business operations.

While the regulation provides market clarity and consumer protection, it simultaneously introduces several restrictions and additional administrative burdens. By properly adjusting business processes, Latvian companies may gain some benefits, but the risk of restrictions on freedom and increased state control remains high.

Existing service providers can adapt to the new requirements until June 30, 2025.

Full article in Latvian can be found HERE.