Is that even legal in LT i.e banning locals from a service they have been granted permission by LT FCIS to operate in the country? Isn't this then an offshore establishment and a breach of the law?
---- quote start
The Republic of Lithuania Law on Prevention of Money Laundering and Terrorist Financing ("the Law") does not prohibit entities operating as virtual currency exchange operators and/or depository virtual currency wallet operators from carrying out other types of economic commercial activities, but such activities must be unrestricted by the laws of the Republic of Lithuania and must comply with the requirements thereof.
However, we recall that Article︀ 25(8) of the Law provides for a mandatory requirement that a virtual currency exchange operator︁ and/or a depository virtual currency wallet operator must not carry out activities or provide services︂ in another state to such an extent that only functions or services which are not︃ essential by the nature of their activity remain in the Republic of Lithuania and are︄ performed or provided exclusively to customers of another state or, as a matter of fact,︅ they cease to carry out activities in the Republic of Lithuania.
This requirement of the︆ Law was aimed at ensuring that providers of cryptocurrency-related services provide their services in such︇ a way that they do not end up providing functions or services in the Republic︈ of Lithuania that are not essential to the nature of their business or that they︉ cease to carry out their business activities in the Republic of Lithuania in general. The︊ aim was to avoid the perverse practice where Lithuania might be considered as a country︋ of offshore establishment only, while cryptocurrency-related service providers would be operating in other countries, thus︌ avoiding stricter establishment regulation and regulatory arbitrage, but leaving the reputational risk of money laundering︍ and terrorist financing to Lithuania. The aim of this provision was to ensure that the︎ established company would have a real connection to Lithuania and would be accountable to Lithuanian️ supervisory and control authorities. It should be noted that this provision does not prohibit the exercise of activities and the provision of services both in the European Union and in other foreign states.
---- quote end
