EMI in Lithuania: how does the license work and what opportunities does it open up for business?

An EMI license in Lithuania is one of the options for fintech companies that plan to operate with electronic money, payments and money transfers on the European market. The license is issued by the Bank of Lithuania, and after obtaining a standard EMI license, the institution can carry out relevant activities not only in Lithuania, but also in the territory of the European Union within the framework of the mechanism provided for by law.

This can be a significant advantage for business, because instead of creating a separate financial structure in each EU country, the company gets the opportunity to scale payment services on the European market. At the same time, EMI is not just a permit to make payments. The license provides for a whole set of requirements for capital, corporate governance, AML/KYC, risk management and protection of client funds.

EMI - Electronic Money Institution, or electronic money institution. This is a licensed financial institution that has the right to issue electronic money and provide certain payment services. Electronic money can be used, in particular, to make payments through electronic wallets and other digital payment solutions. In addition to issuing electronic money, EMI can perform payment transactions, money transfers, transactions with payment instruments and other services within the scope of the obtained license.

That is why the Lithuanian EMI may be interesting for companies that plan to create their own fintech product, payment platform, electronic wallet or international transfer service.

What opportunities does the EMI license open up? The main advantage of EMI is that the company gets the opportunity not only to use the payment infrastructure of a third-party provider, but also to independently provide regulated financial services within the scope of its authorization.

Depending on the structure and the obtained license, the business can:

- issue electronic money;

- carry out payment transactions;

- carry out money transfers;

- work with payment instruments;

- provide services related to electronic money;

- develop its own electronic wallets and payment solutions;

- scale its activities to other EU countries.

The specific list of services depends on what types of activities the company declares during licensing and what rights the regulator grants.

Lithuania has already formed a developed financial ecosystem and a specialized approach to licensing fintech companies. The financial market regulator is the Bank of Lithuania, which authorizes and supervises electronic money and payment institutions.

For an entrepreneur, this means the opportunity to build a European fintech business within a clear regulatory environment and subsequently scale it beyond the Lithuanian market.

A standard EMI license in Lithuania is valid throughout the EU, which is one of the key advantages of such a structure for international business.

Is it possible to obtain an EMI with limited activities? Yes. In Lithuania, there is also an EMI license for carrying out activities with restrictions. It provides for simplified requirements compared to a standard EMI, but has significant restrictions on the volume of operations and geography of activity.

In particular, an EMI with limited activities can operate only in Lithuania. It also imposes restrictions on the average volume of electronic money in circulation and the volume of payment transactions. Therefore, this option may be interesting for a small or new project that wants to test a business model on the Lithuanian market. However, if the main goal is international scaling, it is usually necessary to consider a standard EMI license.

What capital is required for an EMI in Lithuania? A standard EMI license requires a minimum initial capital of EUR 350,000. However, capital is not the only financial requirement. An electronic money institution is also subject to own funds requirements, the calculation of which depends, in particular, on the volume of electronic money in circulation and the nature of the payment services provided by the company. Therefore, an entrepreneur needs to assess not only the amount required to obtain a license, but also the future costs of maintaining the regulatory structure.

Obtaining an EMI in Lithuania is not a formal procedure for registering a company. The Bank of Lithuania assesses whether the applicant is ready to actually carry out financial activities and control the risks associated with them. The company must prepare a package of documents stipulated by regulatory requirements. In particular, this includes information on the business model, company structure, management and owners, financial condition, internal procedures and control systems.

Particular attention is paid to AML/KYC, risk management, internal control and organizational structure. It is important for a financial institution to demonstrate that it is able to safely handle client funds and comply with legal requirements.

What happens to client funds? EMI cannot simply use client funds as its own working capital. Special safeguarding mechanisms are provided to protect user funds. In particular, client funds may be stored in a separate account in the relevant credit institution or otherwise protected from in accordance with the established requirements. This is fundamentally important for the fintech business, since the regulator controls not only the company's ability to earn on payments, but also how protected its clients' funds are.

Is it possible to work with a Lithuanian EMI throughout the EU? Yes, a standard EMI license in Lithuania can be used to provide services in other EU countries in accordance with the rules of European passporting. It is this opportunity that makes the Lithuanian EMI particularly interesting for companies that are planning international activities from the beginning.

For example, a company can create a fintech product in Lithuania and then expand it to other European markets without having to create a completely separate EMI structure in each country. At the same time, for cross-border activities, it is necessary to comply with the relevant procedures and requirements of the host countries.

Who might be interested in an EMI license in Lithuania?

This format may be relevant for companies that:

- launch a fintech platform;

- plan to create an electronic wallet;

- want to issue electronic money;

- work with international payments;

- provide money transfer services;

- create their own payment infrastructure;

- plan to scale the financial product to the EU markets;

- want to move from working through third-party PSPs to their own licensed structure.

At the same time, not every fintech project needs EMI. If the company does not plan to issue electronic money, and its activities are limited to individual payment services, Payment Institution may be enough. Therefore, the choice between EMI and PI must be made after analyzing a specific business model. One of the main mistakes of entrepreneurs is to start the process with registering a company without determining what financial services it will provide.

In fact, first you need to form a business model, determine the list of services, geography of work, clients, sources of income and operating structure. And only after that determine the required type of license and prepare an application for the regulator. It is also important to consider future costs: compliance, AML/KYC, personnel, IT systems, audit, reporting, regulatory oversight and maintaining the necessary level of own funds.

Thus, an EMI in Lithuania can become the basis for creating a full-fledged European fintech business. The license opens up opportunities for issuing electronic money, providing payment services and scaling activities to EU markets, but at the same time imposes serious requirements on the company and its operating model.

Therefore, before obtaining an EMI, it is important to assess not only the opportunities provided by the license, but also all regulatory obligations that will arise after its receipt.

The Antwort Law team helps entrepreneurs and fintech companies prepare for obtaining an EMI license in Lithuania, determine the appropriate regulatory regime, form a corporate structure and prepare the necessary documents. If you are planning to launch a fintech project in the EU or obtain an EMI in Lithuania - contact Antwort Law for a consultation. We will analyze your business model, determine the type of license you need, and help you through the licensing process.

Lidia Ivanova

International lawyer
Antwort Law