Latvia, a small Baltic nation, is quickly rising as a possible fintech hub within the EU. The nation is taking actual strides to draw revolutionary monetary firms, and it is value exploring what units Latvia aside.
A Regulator Open to Innovation and Collaboration
One of the important elements contributing to Latvia’s rising attraction as a fintech hub is the proactive stance of its regulatory authority. The Financial institution of Latvia (Latvijas Banka), which oversees the monetary sector, has demonstrated a forward-thinking
and open method to fostering innovation. Not like jurisdictions the place regulatory processes might be formal, the Financial institution of Latvia actively promotes the nation as a welcoming vacation spot for brand spanking new firms and concepts.
The regulator positions itself as a associate slightly than an adversary to companies. This collaborative method is clear in how the Financial institution of Latvia engages with fintech firms, providing an open platform for dialogue and dialogue.
The regulator has introduced that they provide a novel alternative for candidates to obtain complete suggestions and focus on the applying course of earlier than formally submitting their licensing paperwork. This stage of assist is unmatched amongst EEA regulators,
the place engagement is often restricted to a proper one-hour assembly.
Mārtiņš Kazāks, Governor of the Financial institution of Latvia, emphasised the significance of this method in his opening speech on the Fintech Latvia Discussion board:
“We’re excited to start out engaged on a brand new fintech technique that goals to develop Latvia as a profitable fintech hub in Europe. Our price proposition is predicated on a pleasant and supportive ecosystem, prioritising entry to capital, creating world-class expertise,
and fostering deeper collaboration with stakeholders to construct Latvia’s aggressive place. And let’s be formidable: we’re not simply aiming for a seat on the desk; we’re aiming a lot larger!”
Moreover, the Financial institution of Latvia has invested in creating sandbox environments and innovation hubs the place fintech firms can take a look at new services and products in a managed setting. This fosters innovation whereas guaranteeing that regulatory oversight retains
tempo with technological developments.
EKS System Readiness: A Sport-Changer for Fintech
One other essential element of Latvia’s fintech ecosystem is the opening of its Digital Clearing System (EKS)
to non-bank cost service suppliers (PSPs). This transfer allows digital cash establishments (EMIs) and cost establishments (PIs) to straight course of euro funds inside the Single Euro Funds Space (SEPA) framework. This method is much like the Financial institution
of Lithuania’s CENTROlink, which additionally serves as a direct gateway to SEPA.
Latvia has efficiently accomplished the required technical preparations to accommodate new individuals in its EKS system. The system is now accessible to authorised EMIs and PIs holding EEA licenses for credit score switch companies.
This entry allows firms to supply immediate funds and SEPA credit score transfers straight on behalf of their prospects, eliminating the necessity for industrial banks as intermediaries. By decreasing reliance on conventional banks for correspondent companies, cost
processing turns into extra environment friendly.
The Introduction of a New Crypto License in Latvia
Preserving tempo with the worldwide pattern of integrating cryptocurrencies and blockchain expertise into mainstream monetary techniques, Latvia has launched a brand new crypto license, offering a transparent regulatory framework for companies working within the crypto area.
As of two January 2025, the Financial institution of Latvia has formally began accepting functions for the EU
MiCA license.
The brand new crypto license represents a big step ahead in legitimising and regulating actions similar to cryptocurrency exchanges, pockets companies, and token issuance. By introducing this framework, Latvia goals to draw crypto firms looking for a
dependable and clear regulatory setting. The license additionally establishes a structured pathway for compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) laws, guaranteeing companies uphold excessive requirements of integrity and
safety.
In response to insights shared throughout the session “Licensing QA – Insights from the Financial institution of Latvia” on the eCom21 occasion, firms in Latvia have the distinctive alternative to acquire two licenses underneath a single authorized entity, similar to an e-money or cost establishment
license mixed with a crypto license. This dual-licensing functionality additional enhances Latvia’s attraction as a fintech hub, providing companies larger flexibility and alternatives to develop their companies.
So, what do you suppose – may Latvia develop into a number one fintech hub in Europe?