By Laura K. Inamedinova
June 3rd, 2018

Why Lithuania became one of the leaders amongst ICO projects

Why Lithuania became one of the leaders amongst ICO projects

By Laura K. Inamedinova
June 3rd, 2018

It has been almost a year after the beginning of crypto mania which involved even the ones who had not been interested in business or technology previously. We have seen the restrictions in Asia, the growing popularity in Russia and the leadership of the United States – but there is also one thing which has been quite thrilling and interesting. Lithuania, has become one of the brightest stars in the world of crypto. In 2017, 10% of ICO investments were attracted to this Baltic gem, having only the US and China above.

Such achievement may seem a bit unexpected given the traditional nature of businesses, focused on large states (meanwhile, Lithuania do not only have less than 3 million inhabitants, but is also a particularly young state considering the performance in a market economy). Despite the unusual background for the leaders in business, there are several good reasons which explains the phenomenon of Lithuania within the crypto community.

First of all, it is worth to notice that Lithuanians are really having the golden opportunities for innovative business forms at this moment. Currently, the political situation worldwide seriously affects the conditions of business and economics, and one of the most relevant examples is Brexit. After the decision of the United Kingdom to leave the European Union, many companies (including various projects of financial technologies) started to move their offices or to focus particular activities in other regions.

The Baltic States have become one of such places: business-friendly environment, low taxes (20% income tax) and highly qualified people in a large number of quantitative areas significantly influenced the decisions of entrepreneurs from abroad. Currently, Vilnius can be proud of numerous hubs for startups, wide range of related events and a strong community of young entrepreneurs. Also, these factors can be also associated with the fact that the capital of Lithuania became the first city in Europe where the internationally recognized Blockchain centre, a non-profit organization, supporting blockchain businesses, was opened.

Given the fact that the space in Vilnius was only the third similar centre worldwide (after largely important megalopolises as Melbourne and Shanghai), the prominence in Lithuania in financial technologies is enormously high.

Therefore, it is not surprising that along with the success in the environment of startups and blockchain-related activities, one of the leading positions regarding the released and conducted ICO projects took place.  Focusing on the crypto industry in particular, Lithuania has several essentials which unquestionably contribute to the success of ICO projects.

Knowing the complicated and severely confusing nature of the legal or financial background of ICOs, many struggles arise for the teams executing this type of projects. In general, the attitude of the central bank in each country has an enormous impact on the particular regulations of announcing ICOs. Regarding the case of Lithuania, it is necessary to notice that the attitude of this institution there was especially sceptic at first, but eventually the discourse has become more liberal. Even though there are still a number of existing obstacles, imposed by bureaucrats and the general attitude is not positive, in recent times some serious signs of increasing positivity towards ICO projects appeared. Mr. Vilius Sapoka, the Minister of Finance of Lithuania, has expressed the view that although cryptocurrencies would bring a lot of risk, this phenomenon should not be ignored and blockchain could be widely implemented in businesses along with particular regulations. Reportedly, the central bank of Lithuania started to develop the talks amongst commercial banks, regulators and crypto representatives. Such a thing is quite rare while having a look to the practices worldwide, hence, a conclusion can be made that the success of Lithuania in ICOs could be related to the relatively lenient approach of bureaucratic institutions. Also, despite the tough position which was expressed in autumn 2017, the Bank of Lithuania was willing to have a dialogue with crypto projects and the example of BitDegree is a genuine proof. The online education platform, based on blockchain technology was one of several crypto projects which received the acceptance and encouragement from one of the most important financial institutions in Lithuania.

What is more, the passion for modern technology in Lithuania is a pretty interesting concept. For example, regarding the social issues, people in this country are seen as a conservative civil society which is not often open to something new and unknown in general. However, technologies are absolutely loved there, starting with the wide use of social networks (Facebook in particular) and finishing with digging deeper into such innovations as blockchain.

The popularity of technical degrees is quite large (for instance, last year one of top 3 courses in Lithuanian universities was IT-related), as well as the quality of quantitative studies is also especially high: many graduates become desirable employees amongst top recruiters due to contrast with colleagues from Western or Nordic countries. Despite the popularity of ICO projects amongst people with especially various background, it would not be right to deny that the competence in technologies is not necessary while announcing ICO. The academic knowledge and professional attitude should be seen as factors which helped a small state to become one of the crypto leaders.

Finally, the aspect, connected to popular culture and media, should be mentioned.  Lithuanian tech entrepreneurs, gaining much popularity in a global context, such as Ilja Laurs, the founder of Silicon Valley-based GetJar or Laurynas Jakubaitis and Justas Pikelis who became the figures of the Forbes 30 under 30s list. are widely seen as role models of success and endorsed by many people back home. As these figures receive a lot of attention from a wide range of media channels, it can make an impact on the massive interest of Lithuanians in ICOs. For example, the blockchain-based payment platform Monetha, founded by Jakubaitis and Pikelis, raised 37 million USD in less than 20 minutes. Meanwhile Nextury Ventures, established by Laurs and supporting young tech entrepreneurs, became one of the most well-known incubators for startups, expanding their activities outside Lithuania. Seeing people who are young and also successful definitely provide some food for thought for millenials. Connecting these phenomena with currently the most popular way of investing could definitely create the effect of cryptomania in Lithuania.

All in all, the unexpected success of Lithuania in ICOs can be seen as a consequence of endorsing technologies and business innovations. They are noticeable amongst many interest groups: bureaucrats, entrepreneurs and even ordinary people who might not have the experience or relation to fintech previously, but are willing to learn something new and useful.