Latvia Strives to Become the EU’s Next Crypto and Blockchain Powerhouse

Latvia is steadily becoming an attractive hub for cryptocurrency and blockchain firms, fueled by increasing interest from international firms pursuing Markets in Crypto-Assets (MiCA) licenses.

This development comes as the Baltic country is aggressively building itself as a welcoming and innovative European center for crypto and blockchain companies through favorable regulation, tax incentives, and government support.

According to the Ministry of Economics, several globally recognized crypto-asset service providers are currently considering Latvia for operating licenses. While no specific names have been shared, these newcomers would join Latvia’s ~20 cryptocurrency and blockchain startups, according to data from Venture Faculty.

Key players in Latvia’s crypto ecosystem include Paybis. Paybis, originally from Warsaw, is a global cryptocurrency exchange supporting a wide range of cryptocurrencies and fiat currencies, as well as various payment methods. The company serves users in over 180 countries, and has a significant presence in Latvia, both operationally and legally.

Bitfury Group, founded in 2011 by Riga residents, is another prominent blockchain startup in Latvia. Bitfury Group started out as a provider of Bitcoin miners and mining equipments, before developing into a comprehensive blockchain infrastructure provider for the Web 3.0 ecosystem, focusing on security, sustainability, and innovation.

Another key provider is Primex Finance, an Estonian-founded company that operates a central technology hub in Riga. Founded in 2021, Primex Finance is a non-custodial prime brokerage protocol that enables traders to access lender liquidity for spot margin trading on decentralized exchanges (DEXs) and other leveraged operations across various decentralized finance (DeFi) protocols. It’s powered by a completely decentralized trade execution mechanism, and offers advanced trader tools and features for sophisticated trading strategies.

Towards crypto leadership

Latvia seeks to become a leading hub for crypto and blockchain companies within European Union (EU). On May 06, the Latvian government held a meeting to discuss a new national fintech strategy aimed at strengthening the country’s role as a leading center for financial innovation.

During the meeting, the Financial Sector Development Council discussed the importance of creating a competitive and innovation-friendly regulatory environment, and outlined the next steps for implementing the strategy, including targeted support for the development of Web 3.0 technologies, blockchain-based services, and digital finance infrastructure, local news outlet Lsm.lv reported. The strategy includes plans for a new regime for real-world asset tokenization, which is expected to attract more international investments.

“The development of the Web 3.0 sector was an opportunity for Latvia to increase its economic potential in new sectors,” said Latvia Prime Minister of Latvia Evika Siliņa.

“We had been working diligently for some time to make Latvia the most attractive place for global crypto companies to obtain a MiCA license and expand their activities within the European Union.”

By actively pursuing the implementation of MiCA regulation and facilitating licensing processes, Latvia aims to gain a competitive edge over neighboring countries, many of which still face regulatory ambiguity or impose restrictive policies. This is expected to generate significant economic benefits, such as the creation of high-quality jobs, and the growth of a dynamic fintech ecosystem.

Reinis Znotins, Chair of the Latvian Blockchain Association, co-founder of the Unblock Conference, and former Member of Parliament at the Saeima, spoke on the sidelines of the Unblock Conference in May, stating:

“We believe there’s a huge growth opportunity in [blockchain]. There’s still no clear champion in the EU in terms of who will take the Web3 space, especially after the introduction of MiCA. We want to be at the top, to bring companies here and provide them the best legal environment, lowest fees, and develop our economy in that way.

“With all the shifts that are happening in geopolitics, all the different markets closing, we need to find good ways, innovative ways to grow the [Latvian] economy.”

Proposed tax break

The move follows a recent policy initiative proposing a temporary tax break to attract foreign crypto-asset service providers. In January, Latvia’s Ministry of Economics proposed amending the Personal Income Tax law to exempt non-residents from the current 3% tax on income from the disposal of crypto-assets.

Currently, all crypto-asset transactions conducted from Latvia by foreign clients are subject to a 3% tax on the disposal transaction amount, in addition to the applicable capital gains tax in their home country. This situation has discouraged non-resident crypto-asset service providers from obtaining operating licenses in Latvia due to double taxation.

The exemption seeks to address this issue by suspending the 3% tax for non-residents for a period of three years, from January 01, 2025, to December 31, 2027. It’s designed to enhance Latvia’s attractiveness to international crypto companies, and is expected to result in the creation of at least 100 new well-paid jobs in the crypto-asset sector, and generate EUR 7 million in labor taxes through December 31, 2027.

To evaluate the effectiveness of the policy, the draft law assigns the Ministry of Economics the task of producing a report to the Cabinet of Ministers by July 31, 2027, assessing the impact of the legal framework on the development of the crypto-asset market in Latvia, including tax revenues, investment inflows, and job creation by foreign crypto-asset service providers.

Fintech gets a boost

Latvia’s new fintech strategy, which has been in the works since at least late-2024, aims to position the Baltic country as a regional hub for innovation, investment, and sustainable growth.

The plan seeks to enhance funding opportunities for fintech companies through specific state financing programs and by attracting international investors.

Workforce development is another key focus, with the government planning to support retraining initiatives and streamline relocation processes to make it easier for skilled professionals to move to Latvia. In partnership with universities and research institutions, the strategy also aims to introduce startup-friendly pathways that will help attract top global talent.

Development goals include increasing the number of fintech companies, boosting investment in the sector, and expanding the fintech workforce.

The fintech strategic is being developed by public institutions and ministries, in collaboration with industry representatives, and private sector experts.

It will build on other government-led fintech initiatives, among which the Innovation Hub, the Regulatory Sandbox, the Securities Sandbox, and fast-track pre-licensing.

Currently, Latvia is home to about 140 fintech companies, according to Venture Faculty, significantly fewer than Lithuania and Estonia, which have around 270 and 260 fintech companies, respectively.