Brexit an un­likely boon for Lithua­nia’s ‘fin­tech’ drive

Blockchain tech­nol­ogy al­lows peer-to-peer pay­ment sys­tems Al­lows to mit­i­gate risks

Kuwait Times - - Technology -

VILNIUS: Bri­tain’s divorce with the Euro­pean Union is pay­ing off for Lithua­nia as it strives to be­come a north­ern Euro­pean hub for fi­nan­cial tech­nol­ogy, or “fin­tech” firms, and blockchain-based start-ups. Jostling with Den­mark and Swe­den as well as fel­low Baltic eu­ro­zone states Es­to­nia and Latvia for the fa­vor of dig­i­tal econ­omy in­vestors, Lithua­nia has is­sued 51 fin­tech li­censes since 2016, in­clud­ing 32 last year, and an­other 19 ap­pli­ca­tions are cur­rently un­der re­view, ac­cord­ing to the coun­try’s cen­tral bank.

Fin­tech refers to IT com­pa­nies de­vel­op­ing new soft­ware, ap­pli­ca­tions or busi­ness models for the fi­nan­cial sec­tor, in­clud­ing blockchain-based dig­i­tal and crypto cur­ren­cies. Blockchain tech­nol­ogy al­lows peer-to-peer pay­ment sys­tems and de­buted in 2009 as a pub­lic, en­crypted ledger for the lead­ing cryp­tocur­rency bit­coin. Com­pa­nies knock­ing on Lithua­nia’s door in­clude big names like UK fin­tech bank­ing startup Revo­lut, which ap­plied for a Euro­pean bank­ing li­cence through the Lithua­nian cen­tral bank three months ago.

“No­body knows how Brexit will end but a bank­ing li­cense in con­ti­nen­tal Europe al­lows to mit­i­gate risks,” An­drius Bi­ceika, Revo­lut’s head for Baltic states, told AFP. The UK-based Con­tis Group al­ter­na­tive pay­ment firm, de­Vere fi­nan­cial con­sul­tants and the Sin­ga­pore­head­quar­tered In­staRem spe­cial­iz­ing in cross-bor­der money trans­fers are also among the com­pa­nies hav­ing won, or bid­ding for, Lithua­nian fin­tech li­censes. The Baltic state’s cen­tral bank said it was in talks with more than 100 other com­pa­nies, in­clud­ing 24 from the UK.

‘Pre­cau­tion­ary mea­sures’ Lithua­nia’s cen­tral bank first rolled out the red car­pet for fin­tech firms in 2016 hop­ing to im­prove com­pe­ti­tion in its bank­ing sec­tor, dom­i­nated by Nordic bank­ing groups like Swed­bank or SEB. That year, Bri­tain’s vote to leave the EU pre­sented Vilnius with a fresh op­por­tu­nity to woo for­eign firms ea­ger to find ways to stay in the EU mar­ket after Brexit. “We saw an op­por­tu­nity, and we took it,” said Bank of Lithua­nia board mem­ber Mar­ius Jurgi­las.

He said the cen­tral bank of­fers speedy pro­cess­ing and an amenable reg­u­la­tory en­vi­ron­ment, now promis­ing e-money and pay­ment li­censes within three months, much faster than in most other EU states. While ad­mit­ting that Lon­don is likely to re­tain its sta­tus as the main Euro­pean hub for fin­tech firms, Jurgi­las said many com­pa­nies are ea­ger to take “pre­cau­tion­ary mea­sures” with Brexit on the hori­zon.

At­tract­ing young tal­ent to well-paid jobs is cru­cial for the na­tion of 2.8 mil­lion, which is strug­gling to stem the brain drain to richer western Euro­pean coun­tries. Man­tas Kati­nas, who heads Lithua­nia’s for­eign in­vest­ment pro­mo­tion agency, said au­thor­i­ties must now fo­cus on ed­u­ca­tion and more direct flights to Lon­don to win Bri­tish fin­tech in­vestors eye­ing other EU cities as Brexit looms.

Kati­nas also points to the need for Lithua­nia to de­velop e-res­i­dency, a kind of global dig­i­tal iden­tity pro­gram first launched by Es­to­nia in 2014, as an­other tool for in­vestors. “No­body’s asleep. Every­one’s watch­ing what Lithua­nia is do­ing and copies it. Swedes, Danes see that we are do­ing quite well and also want to hop on this train,” he said.

Blockchain hub Lithua­nia’s cen­tral bank has also joined the drive to at­tract fin­tech firms using blockchain tech­nol­ogy by an­nounc­ing plans to launch a plat­form on which com­pa­nies may test new code and ser­vices. Ac­cord­ing to Jurgi­las the pro­ject “may sur­pass the fi­nan­cial sec­tor and de­velop into a tech­no­log­i­cal plat­form for the whole pub­lic sec­tor”.

In a sep­a­rate ini­tia­tive, Euro­pean Par­lia­ment mem­ber and en­tre­pre­neur An­tanas Guoga launched a blockchain cen­tre in Lithua­nia’s cap­i­tal Vilnius last month to boost start-ups and es­tab­lish con­nec­tions with Asia and Aus­tralia. Lon Wong, pres­i­dent of the Sin­ga­pore-based Foun­da­tion and a board mem­ber at the Vilnius cen­tre, said the Lithua­nian hub could fa­cil­i­tate in­ter­na­tional talks on in­dus­try reg­u­la­tion.

“We are in a very nascent in­dus­try where every­one is learn­ing as we progress,” he said in an interview. “In­dus­try ex­perts and reg­u­la­tors around the world should sit down to­gether and un­der­stand where the prob­lems are and share this knowl­edge and there­fore im­prove the in­dus­try ac­cord­ingly,” he added. Reg­u­la­tors will also have to mit­i­gate iden­tity theft risks, and Lithua­nia’s blockchain in­dus­try has al­ready be­come a tar­get.

Two weeks ago, a group of lo­cal blockchain ex­perts said they be­came vic­tims of iden­tity theft after be­ing listed as team mem­bers of blockchain startup Prodeum which dis­ap­peared with in­vestors’ money. The EU is work­ing on stricter rules to com­bat money laun­der­ing and ter­ror­ism fi­nanc­ing on ex­change plat­forms for vir­tual cur­ren­cies. Pierre Marro, an EU Com­mis­sion of­fi­cial, said last month the EU ex­ec­u­tive will seek talks with Euro­pean Cen­tral Bank and Euro­pean Par­lia­ment this year to get more “le­gal cer­tainty” in the area. —


VILNIUS: Peo­ple at­tend a pre­sen­ta­tion at the blockchain cen­tre, which aims at boost­ing start-ups, on Fe­bru­ary 7, 2018 in Lithua­nia’s cap­i­tal. —

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