Crypto-asset service providers

• According to Article 68 of Regulation (EU) 2023/1114, the persons involved in the governance must be of good repute and have the appropriate education and experience to manage a crypto-asset service provider.
• According to Article 68 of Regulation (EU) 2023/1114, the persons involved in the management and shareholders with at least 10% of share capital or voting rights must be of good repute and not have a criminal record.
• According to Annex IV of Regulation (EU) 2023/1114, own funds must be ensured in the amount of 50 000–150 000 euro depending on the type of the selected service or the amount of the capital requirement (a quarter of the fixed overheads of the preceding year) if it exceeds the amount of the own funds requirement.

Regulation (EU) 2023/1114 does not apply to specific cases such as when crypto-asset services are provided in a fully decentralised manner, i.e. without any intermediaries, or involve individual crypto-assets such as NFTs (crypto-assets that are unique and non-fungible). See a detailed list of exceptions in Article 2 of Regulation (EU) 2023/1114.

The process of obtaining authorisation is preceded by a familiarisation stage, during which Latvijas Banka organises a meeting with the respective entrepreneur to discuss their planned activities. At this stage, the company does not necessarily have to be legally established.

What does the entrepreneur do

• Collects information on the company's shareholders and officials.
• Gathers general information on the type of initial capital and the origin of funds.
• Prepares information on the planned business model and the selected types of services: the procedure for providing each service, the organisation of the transaction flow, the technical solutions employed, and the customers.
• Starts drafting the necessary documents.

What does Latvijas Banka do

• Provides advice on the applicable regulation and documents to be submitted.
• Conducts the initial assessment of compliance.
• Assesses whether it is possible to continue the process for obtaining authorisation.

What additional actions should the entrepreneur take

• Carefully familiarise oneself with the requirements of legal acts.
• Assess the need to engage qualified consultants.
• When engaging consultants, the company should actively participate in the process so that the final result is appropriate for the business model and its inherent risks.

Documents to be submitted

• CVs of shareholders and officials;
• general information on the origin of the initial capital;
• description of the services and their provision.

Costs

Latvijas Banka provides assistance with preparing an application and offers advice free of charge.

An entrepreneur prepares and submits an application for authorisation.

What does the entrepreneur do

• Submits a completed application for authorisation and all information and documents to be added according to the requirements of Article 62 of Regulation (EU) 2023/1114 and the regulatory technical standards (RTS) for obtaining authorisations (the RTS draft versions are available here).
• Receives information from Latvijas Banka on the commencement of the substantive review process of the application or on any shortcomings that need to be addressed in the submitted application.
• Provides the necessary additional explanations.

What does Latvijas Banka do

• Within 25 working days, conducts a completeness check of the application (a substantive assessment of the application has not yet been initiated).
• If the application is incomplete, notifies the entrepreneur by letter containing information on the identified shortcomings and sets a deadline by which they need to be addressed.
• If the application is complete, sends a letter to the entrepreneur informing them that a review of the application has been initiated.
• Designates the manager of the project on issuing authorisation and coordinates the process of obtaining authorisation.

What additional actions should the entrepreneur take

• Utilise advice offered by Latvijas Banka before submitting the application.
• Ensure the documents to be submitted are complete and of high quality.
• Prepare the documents according to the planned types of services.
• Check whether all the necessary documents have been submitted (refer to the list of documents to be submitted below).

List of documents to be submitted

A legal person submits an application to obtain authorisation to provide crypto-asset services. The application is prepared according to the requirements of RTS (the RTS draft versions are available here), appending the information and documents specified in the application, to include the following.

1) A programme of operations which sets out the types of crypto-asset services to be delivered, including where and how those services will be provided.

2) Information on prudential safeguards according to Article 67 of Regulation (EU) 2023/1114.

3) A description of the applicant's governance arrangements; if the applicant is a subsidiary of an institution regulated by another European Union Member State, a description of the governance of the group (if applicable).

4) Information on the members of the management body, assessment of their repute, knowledge, skills, and experience (CVs, documents certifying their education, a statement from the Punishment Register).

5) Information on the stockholders (shareholders) that have a qualifying (direct or indirect) holding in the applicant and the size of the holding as well as information on the assessment of their repute (CVs, a statement from the Punishment Register); a description of the structure of the commercial company's stockholders (shareholders).

6) A description of the internal control and management framework mechanism, policies, and procedures (also including a description of the administrative, risk management, and accounting procedures necessary to ensure appropriate and sufficient management of the institution) aiming to identify, assess, and manage risks.

7) A description of the procedure, instruction, arrangements, and measures as well as other documents ensuring the establishment and effective operation of the internal control system to manage risks associated with money laundering and terrorism and proliferation financing, and sanctions risk. This also includes a detailed assessment of the risks inherent in the services provided.

8) A plan and description of business continuity measures, including effective plans for emergency situations as well as a description of the procedure for regularly checking and reviewing the suitability and efficiency of these plans.

9) The technical documentation of information and communication technology systems and security arrangements as well as a description thereof, including a description of the procedures and policies, a detailed assessment of the risks inherent in the services provided as well as a description of security control and risk mitigation measures.

10) A description of the measures and procedures implemented to ensure the segregation of customer crypto-assets and funds from the assets and funds of the crypto-asset service provider.

11) A description of the procedure for handling complaints.

12) The articles of association, unless available on public registers.

13) The policy and procedure for supervising and controlling outsourcing functions to avoid a deteriorating quality of the applicant's internal control (if applicable).

14) A description of arrangements for the custody and administration of reserve assets, where crypto-asset custody and administration services are to be provided on behalf of customers.

15) A description of the trading platform's operating rules and of the procedures and system to detect market abuse, where a crypto-asset trading platform is to be operated.

16) A description of the non-discriminatory trading policy governing the relationship with customers as well as a description of the methodology for determining the price of the crypto-assets the applicant proposes to exchange for funds or other crypto-assets, where crypto-assets are to be exchanged for funds or other crypto-assets.

17) A description of the execution policy for orders, where crypto-asset orders are to be executed on behalf of customers.

18) Information on the required knowledge and expertise of the natural persons providing consultations or managing portfolios on behalf of the applicant, where crypto-asset consultations or portfolio management is to be provided.

19) Information on how the crypto-asset transfer services will be provided on behalf of customers, where such transfer services are to be provided.

20) Information on the type of crypto-asset involved in the crypto-asset service.

Costs

2500 euro for reviewing the documents and information submitted to obtain authorisation.

Review deadline for the application

25 working days for a completeness check of an application.

Within 40 working days following the confirmation that the application is complete, Latvijas Banka reviews the application and takes a decision to issue or refuse to issue authorisation. The review deadline for the application may be extended for objective reasons if the information provided in the application is insufficient to take a decision.

Latvijas Banka carries out a substantive assessment of the application.

What does the entrepreneur do

• Follows the review process of the application, consulting the project manager designated by Latvijas Banka.
• Responds to Latvijas Banka's requests for additional information as soon as possible as well as appoints a contact person to ensure optimum communication.
• Makes corrections to the submitted documents in line with Latvijas Banka's instructions.
• Participates in the meetings held by Latvijas Banka.

What does Latvijas Banka do

• Carries out a substantive assessment of the application.
• Communicates with the applicant's contact person in case shortcomings have been identified.
• Drafts a letter in case shortcomings have been identified in the application.
• Continues reviewing the application in line with the submitted additions.
• Completes the assessment of the application.

What additional actions should the entrepreneur take

• Follow the course of the review of the application.
• Provide additional explanations and make the necessary corrections as soon as possible.
• Representatives of the applicant, rather than only consultants (if engaged), are also invited to participate in the meetings held by Latvijas Banka.

Costs

No additional costs associated with the review of documents during the assessment stage of the application are involved.

Latvijas Banka completes the assessment of the application and takes a decision to grant or refuse to grant authorisation.

What does the entrepreneur do

• Prepares to obtain authorisation and start operating in accordance with the business plan and the procedures developed in association with the internal control system.
• Designates users of Latvijas Banka's data reporting system for future communication with Latvijas Banka and submission of performance reports.

What does Latvijas Banka do

• Drafts a decision to grant or refuse to grant authorisation.
• Informs the applicant on the decision taken.
• In case of a positive decision, publishes information on its website and provides information to the European Securities and Markets Authority.

What additional actions should the entrepreneur take

• Familiarise oneself with the information provided by Latvijas Banka regarding access to the data reporting system.
• Familiarise oneself with the information related to the requirements and procedure for submitting performance reports.
• Prepare to start operating in accordance with the approved business plan and procedures.

Costs

No additional costs associated with obtaining authorisation during the stage of obtaining authorisation are involved.

Latvijas Banka supervises the operation of the company in accordance with the requirements of Regulation (EU) 2023/1114.

What does the entrepreneur do

• Responds to Latvijas Banka's requests.
• Drafts reports in accordance with the requirements of Regulation (EU) 2023/1114.
• Notifies Latvijas Banka of any changes in the information and documents submitted to receive authorisation.
• Notifies Latvijas Banka of any changes in the procedure for providing services.
• Notifies Latvijas Banka of significant incidents in the process of providing services.
• Becomes acquainted with the contact person designated by Latvijas Banka.

What does Latvijas Banka do

• Designates the contact person of the company.
• Assesses compliance of the company's operation with the requirements of legal acts.
• Requests additional information on the operation and performance indicators of the company.
• Examines the reports submitted and supervisory information.

What additional actions should the entrepreneur take

• In case of uncertainties, contact the contact person designated by Latvijas Banka.
• Submit reports and the requested supervisory information on a regular basis.
• Notify of any changes in the process of service provision as well as of changes in the information and documents submitted to receive authorisation, including in the case of any changes in the structure of officials or shareholders.

Costs

A crypto-asset service provider that has obtained authorisation to provide crypto-asset services in accordance with Article 63 of Regulation (EU) 2023/1114 pays Latvijas Banka up to 0.6% (inclusive) of the annual gross income from the provision of crypto-asset services, but no less than 3000 euro per year.

Annually, Latvijas Banka establishes the amount of the payment to be made by its supervised financial market participants and defines the procedure for making those payments.