Crypto-Assets for Share Capital Payments: A New Option for Companies in Latvia

The latest amendments to the Commercial law of the Republic of Latvia (hereinafter – the Amendments) have introduced significant improvements to the regulatory framework for investors and shareholders. These changes align with the European Union’s crypto-asset regulation (MiCA) and enhance opportunities within the Latvian commercial market. Notably, the Amendments now allow limited liability and joint-stock companies in Latvia to use crypto-assets as payment for their share capital. This article will provide an insightful overview of the key aspects in relation to this new alternative of share capital payment by crypto-assets.

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On May 31, 2023, the European Parliament and Council Regulation (EU) No. 2023/1114 on crypto-asset markets (hereinafter – MiCA) was adopted. It provides a unified legal framework for the crypto-asset sector at the European Union level, including regulating the issuance of crypto-assets, admission to trading, as well as the provision of services related to crypto-assets. Given that, the MiCA has significantly regulated the crypto-asset sector across the European Union, ensuring higher standards of security and transparency, the risks associated with the use of stable crypto-assets such as asset-referenced tokens (ART) and e-money tokens (EMT) are also to be significantly reduced. 

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Before the Amendments entered into force, the share capital of the company could have been paid in the following ways: 

1. in cash; or

2. with a property contribution, i.e., in tangible or intangible property, which can be valued in monetary stipulations and may be used in the commercial activities of the company.

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As of 30th December 2024, the Commercial Law of the Republic of Latvia allows the use of crypto-assets as property contributions for share capital. The aim of introducing such an option was to increase the appeal of the Latvian business environment and strengthen further the investment and innovation sectors. As the Executive Director of the Latvian Blockchain Development Association Reinis Znotiņš has noted, this project will make Latvia an even more desirable location for businesses in the blockchain and crypto-asset sectors since Latvia is among the first EU countries that offer businesses this alternative.

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To use crypto-assets for share capital payments, the following conditions must be met – the crypto-assets shall be deposited either in a:

~ distributed ledger address (DLA) or  

~ account opened with a crypto-asset service provider listed in the MiCA.

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The listed requirements are set in place to avoid crypto-asset deposits into the so-called private wallets, as they minimise the potential risks associated with money laundering, beneficial owner identification, and the potential for enforcing claims against crypto-assets. 

An advantage of using crypto-assets for share capital is that investments in asset-referenced tokens (ART) and e-money tokens (EMT) do not require the valuation opinion of an expert, which is typically mandatory for other types of property contributions. Instead, the shareholders may assess the ARTs or EMT's value based on the average price over the six months before the valuation on a crypto-asset trading platform that complies with MiCA. 

The Ministry of Justice of Latvia suggested implementing this alternative in practice and aim that more enterprises will be progressively more interested in the opportunity to provide share capital of the company property contributions in the form of crypto-assets. Nevertheless, companies in Latvia have yet to widely adopt crypto-assets for share capital payments.

Beyond crypto-assets, companies in Latvia can continue to cover share in monetary terms by opening payment accounts for the company in payment service provider institutions of EU and foreign payment service providers. According to the Law on Payment Services and Electronic Money, payment services may be provided by a credit institution, an electronic money institution, a payment institution, the European Central Bank or Bank of Latvia (or the central bank of another country), a savings and loan association or an institution licensed in an EU Member State. Another option to cover the share capital of the company is through a contribution of property, such as investments in assets, real estate, intellectual property, or other tangible or intangible items that can be valued in monetary terms.

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If you need assistance

Contact us to discuss how we can support you with company establishment, including the option to use cryptocurrency for share capital contributions. We can provide legal, financial, and business consulting support, offering tailored solutions and guidance at all stages of your operations.

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The information in this article is general and not intended as legal advice. It is for information purposes only and does not reflect any particular situation or circumstances and should not be relied upon as a source of professional advice.

Authors: Jēkabs Senkāns, Lawyer in SIA “Venture Faculty” and Daiga Kroņkalne, Legal Assistant in SIA “Venture Faculty”