Latvia Navigates Fintech Wave: Focus on AI, Cryptocurrencies and Synthetic Data
Summary:
This article discusses the growth of fintech in Latvia, led by the Bank of Latvia. The bank, in its role as the primary financial regulator, has developed its Innovation Hub to help fintech firms adapt to the Latvian marketplace. Despite the absence of specific cryptocurrency regulations, the hub offers guidance and risk assessments to businesses while providing a platform for personal interactions with regulators. The bank acknowledges the potential of AI technologies and has implemented tools like OpenAI's ChatGPT. Furthermore, it is embarking on an initiative related to synthetic data, purposed to aid tech startups to refine their business models. The article also touches upon the current status of cryptocurrency investments in the country.
The explosion of financial technology (fintech) and emerging technologies has prompted a scramble among global policy makers to comprehend and regulate them. Countries like the United States and El Salvador have been vocal about embracing these new technologies, while others, such as Latvia, have quietly entered the scene. As a small nation located in the Baltics, bordered by Estonia and Lithuania, Latvia is amongst these silent players. To gain deeper insights on how Latvia's regulatory bodies are handling technologies like AI and cryptocurrencies, a representative from Cointelegraph held a discussion with Marine Krasovska, who handles fintech at the Bank of Latvia, Latvia's central bank.
Contrary to Estonia, the first European nation to clarify regulations for digital currencies, digital assets in Latvia still lack regulatory control. The Latvian Personal Income Tax Act categorizes cryptocurrencies as capital assets which are liable for the general 20% capital gains tax. Back in 2020, the Financial and Capital Market Commission (FCMC), one of Latvia's financial regulatory authorities, cautioned the public about potential crypto fraud, particularly considering that in Latvia, crypto-based companies are operating in a less regulated environment compared to financial and capital markets.
However, since its initial warning, the FCMC has not attempted to create fresh regulations for cryptocurrency. Krasovska explained how the central bank of Latvia, which is the main regulatory body, has been managing its Innovation Hub in the past five years. While not compulsory, the bank recommends fintech companies to utilize the Innovation Hub as their stepping stone into the Latvian market. Krasovska discussed about the Innovation Hub at the Global Government Fintech Lab 2022 conference and emphasized how it's an opportunity for these businesses to personally interact with regulators, understand the necessary business licensing and mitigate potential risks.
The bank has also introduced a pre-licensing procedure within the Innovation Hub. Under this initiative, the bank aids fintech firms, especially those working with digital assets, by reviewing the quality of their collection of documents required for official applications. In 2022, the Innovation Hub conducted 72 consultations and around 40% of participants were from Latvia. The data indicates a rising interest in crypto and electronic money institution services.
Alongside aiding companies to flourish in Latvia's fintech landscape, the Latvian central bank is also adopting new technologies internally to streamline processes. This includes migration of central bank data to the cloud and integrating AI technologies like OpenAI's popular chatbot, ChatGPT.
The central bank of Latvia has taken up a new initiative related to synthetic data. This initiative allows technology newcomers and tech companies creating new solutions to use synthetic data sets to refine their business models, as the bank is legally unable to provide real data.
The status of crypto in Latvia at present is not particularly rosy, with a report released by the central bank in the summer indicating a decrease of local crypto asset investments by 50% over last year. The state of crypto asset investments and the corresponding market trends globally are causing a drop in the optimism of investors. Nevertheless, Krasovska sees the adoption of the Markets in Crypto-Assets (MiCA) legislation by the European Union as a sign of hope, ensuring high standards for financial services.
Published At
9/19/2023 4:31:06 PM
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