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FinTech news and the Law on Crowdfunding
Lithuania has approved two important decisions to foster Fintech industry in Lithuania: the New regulation on Remote Identity Verification and the Law on Crowdfunding have been adopted.
As regards the first case, according to the new regulation, remote identification will be possible not only by using a qualified electronic signature, but also by applying two supplementary methods, that is, by using the means of electronic identification issued in the European Union under notified electronic identification schemes and by electronic means allowing video streaming/video transmissions.
As regards to the second case, the law aims to turn the ever increasingly popular crowdfunding platform providers´ activities more transparent for the clients and investors. A project using crowdfunding should be intended to meet business, professional, science, research and other needs except for consumption. Funds can be granted to the project owner in the following forms: as a loan or other monetary form, or by acquisition of financial instruments issued by the project owner. Regulation of crowdfunding does not apply to crowdfunding based on non-financial consideration/incentives (equity and reward crowdfunding).
There are specific requirements detailed in the law for start of crowdfunding activities. For instance, operator should be included in the public list of crowdfunding platform operators. Prudential requirements for the crowdfunding platform operator (requirements for its capital) are also set on. Throughout its term of operation, the platform operator must meet at least one of these conditions: its equity must not be less than the greater of the following: i) EUR 40,000; ii) the calculated own capital requirement which constitutes 0.2 per cent of the amounts financed through the crowdfunding platform and not yet repaid to investors; iii) or the platform operator must have a suretyship or guarantee document issued by an insurance company or financial institution for not less than EUR 100,000 per claim of investors to indemnify their losses, and EUR 500,000 for all claims of investors to indemnify their losses per year.
Without a shadow of doubt the new law will promote alternative financing in Lithuania. Law on Crowdfunding will create more possibilities not only for businesses, especially SMEs, to attract financing but also for investors to invest their money into the projects. Deloitte Legal team was involved in the legislation process.