Despite the fact that the EU member states have been on lockdown for the past few months, it seems that the UK government still has an ambitious plan that the Brexit transition period will end on 31 December of this year (“Transition Period”) as it has been originally set.
As the discussion on the future relationship of the UK and Europe continues during the lockdown, of course, not as efficiently as it could be done in good times, the payment service providers and other financial institutions established in the UK need solutions on how to continue their business in the continent once the Transition Period is over.
One of the options is to continue the business in Europe under the “equivalence regime” which is foggy at the moment. Equivalence decisions can bring benefits in terms of improving cross-border business conditions. EU’s proposal on the “equivalence regime” in the area of financial services is scheduled to be assessed by stakeholders by end-June 2020. The third country (the status of the UK after the Transition Period) that wants its regulations to be recognised as equivalent to the EU regulations will have to demonstrate that its rules and supervision result in outcomes equivalent to those set out in the corresponding EU framework.
As it is unlikely that the equivalence will substitute the rights granted by the EU passporting system for financial institutions and, further, it is not clear when this regime will come into force, the financial institutions have started actively establishing subsidiaries in the selected EU member state(s) and applying for licences to provide particular financial services once the date of the Transition Period has been set out.
Lithuania is the one of the leading jurisdictions where UK-based fintech businesses are currently willing to relocate. Within the past few years Lithuania has built a fintech-friendly ecosystem: (i) the government has adopted a package of regulations to foster fintech businesses; (ii) private stakeholders have invested in launching hubs for fintech companies (ROCKIT, Vilnius Techpark); (iii) the supervisory institution, the Bank of Lithuania, has taken actions to make the licensing process as smooth and fast as possible; the payment institution or e-money institution licences are issued within 3 months. Further, Fintech has an opportunity to test their products and services in the sandbox. Lastly, access to the payment infrastructure is offered to the payment services providers.
Key information on the requirements to obtain an e-money institution or payment institution licence in Lithuania can be found here.
