Latvia central bank opens to fintech with ‘Innovation Hub’
Fintech innovations and emerging technologies have swept the world, causing global lawmakers to rush to understand and regulate them.
While some countries like the United States and El Salvador have had a public relationship with adopting new technologies, others have quietly joined the game. Among these is Latvia, a small country located in the Baltics, neighboring Estonia and Lithuania.
Cointelegraph spoke with Marine Krasovska, the head of financial technology at Latvijas Banka (Bank of Latvia) — Latvia’s central bank — to better understand how regulators in the country are dealing with new technologies like cryptocurrencies and artificial intelligence (AI).
Unlike its neighbor Estonia, which was the first European country to provide clear regulations and guidelines for digital currencies, these assets remain unregulated in the Latvian landscape. The Latvian Personal Income Tax Act defines crypto as a capital asset subject to the general capital gains tax of 20%.
Back in 2020, one of the country’s financial regulators, the Financial and Capital Market Commission (FCMC), warned the public about crypto fraud — particularly given that in Latvia, crypto companies “operate in an infrastructure that is currently characterized by lower regulation than in the financial and capital markets.”
An upcoming hub of innovation
Since early warnings from the FCMC, Latvia has not developed new cryptocurrency regulations. However, Krasovska explained that in the last five years, the central bank, which is the primary regulator in Latvia, has been operating its Innovation Hub.
Krasovska said participation by fintech companies is not mandatory; however, the bank advises it as a “first entry point” to the Latvian market. The central bank offers this service free of charge for international companies and those originating from Latvia.
“When businesses come to the Innovation Hub and begin to describe their business model, sometimes we start to understand what companies actually need and don’t need,” she said.
She added that it’s an opportunity for businesses to talk in person with regulators to understand the business licensing needed and get risks assessed.
“We always suggest for companies to bring a lawyer to disclose interpretation risks. Interpretation of legislation is a very high-level responsibility.”
Within the Innovation Hub, the bank has also created a pre-licensing process. According to Krasovska, this was created to help fintech companies — particularly those dealing with digital assets — create a “package of documents” that they can receive feedback on regarding the quality.
Related: Germany’s blockchain funding increases 3% amid market downturn: Report
“So when the official application goes in,” she said, “the license process will be focusing on the main ideas rather than the quality of the application. This new pre-licensing began last summer.”
“We want to see more innovation on the market. But we also want to see that the risks are managed in a proper way.”
Krasovska said that last year, the Innovation Hub had 72 consultations with around 40% of all participants from Latvia. She commented that the hub’s data reveals increased interest from companies in “crypto and electronic money institutions services.”
Adoption from the inside
Along with helping businesses thrive in the Latvian fintech landscape, Krasovska said that the Latvian central bank itself is adopting new technologies to streamline its processes from the inside.
This includes moving central bank data into the cloud and adopting AI technologies like OpenAI’s popular chatbot ChatGPT.
“We, as a central bank, will also start this year to integrate artificial intelligence and ChatGPT in our work. Not just not just trying to do some kind of studies as everyone is using it, but we’re starting to adapt it in terms of we have identified our needs.”
She said the central bank created an internal lab two years ago, which began experimenting with different kinds of technological solutions.
Related: European Banking Authority calls for early adoption of stablecoin standards
She highlighted ChatGPT feasibility studies the bank has conducted, which will help it summarize large quantities of documents, such as tax documents that she called “not structured information.”
Krasovska also said the bank employs AI to help with data direction projects and supervise code.
Synthetic data creation
When it comes to data, the fintech executive said the Bank of Latvia is spearheading a new project in relation to synthetic data.
She said that when newcomers or tech companies developing new solutions ask for a data set to train business models, it has nothing it can legally provide.
“This year and also next year, we will be working with the database ideas from which we can create this synthetic data that is like a synthetic lottery or something along those lines,” she said.
“Then companies can come and use these different types of data to understand how their tools work or don’t work before they scale the business and offer their solution to real customers.”
For example, businesses may need access to a large transaction database to understand how related monitoring tools work, “so what we’re doing right now is working on this integrated database,” she said.
Latvia and the current state of crypto
Over the summer, a report from the Latvian central bank said that local investments in crypto assets had declined by 50% over the past year.
“The number of the people purchasing crypto-assets as well as making payments with payment cards to invest in crypto-assets in Latvia declines.
This can be explained by global developments such as the negative sentiment of investors, detected cases of fraud and cases of… pic.twitter.com/uOIbJvIlsi
— Joshua Rosenberg (@_jrosenberg) August 4, 2023
The report was based on findings from payment card usage, revealing that 4% of the population bought crypto assets in February 2023, compared to 8% in the same month of 2022.
When asked about the sentiment toward cryptocurrencies in Latvia, Krasovska pointed to the crypto market conditions in combination with slumping market trends globally: “Globally, the financial markets are the way they are right now, and of course, this is [excluding] the crypto [market].”
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Aside from the rocky conditions for the crypto community brought on by the lingering bear market, regulatory difficulties in major markets have caused investor sentiment to become less optimistic.
However, Krasovska pointed toward the European Union’s adoption and implementation of the Markets in Crypto-Assets (MiCA) legislation as something the central bank can lean on.
“With the adoption of MiCA, we can ensure very high standards for financial services.”
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Representatives of European Union member states reached an agreement on Wednesday in the Council of the EU to move forward with the controversial “Chat Control” child sexual abuse regulation, which paves the way for new rules targeting abusive child sexual abuse material (CSAM) on messaging apps and other online services.
“Every year, millions of files are shared that depict the sexual abuse of children… This is completely unacceptable. Therefore, I’m glad that the member states have finally agreed on a way forward that includes a number of obligations for providers of communication services,” commented Danish Minister for Justice, Peter Hummelgaard.
The deal, which follows years of division and deadlock among member states and privacy groups, allows the legislative file to move into final talks with the European Parliament on when and how platforms can be required to scan user content for suspected child sexual abuse and grooming.
The existing CSAM framework is set to expire on April 3, 2026, and is on track to be replaced by the new legislation, pending detailed negotiations with European Parliament lawmakers.
EU Chat Control laws: What’s in and what’s out
In its latest draft, the Council maintains the core CSAM framework but modifies how platforms are encouraged to act. Online services would still have to assess how their products can be abused and adopt mitigation measures.
Service providers would also have to cooperate with a newly-established EU Centre on Child Sexual Abuse to support the implementation of the regulation, and face oversight from national authorities if they fall short.
While the latest Council text removes the explicit obligation of mandatory scanning of all private messages, the legal basis for “voluntary” CSAM detection is extended indefinitely. There are also calls for tougher risk obligations for platforms.
Related: After Samourai, DOJ’s money-transmitter theory now looms over crypto mixers
A compromise that satisfies neither side
To end the Chat Control stalemate, a team of Danish negotiators in the Council worked to remove the most contentious element: the blanket mandatory scanning requirement. Under previous provisions, end-to-end encrypted services like Signal and WhatsApp would have been required to systematically search users’ messages for illegal material.
Yet, it’s a compromise that leaves both sides feeling shortchanged. Law enforcement officials warn that abusive content will still lurk in the corners of fully encrypted services, while digital rights groups argue that the deal still paves the way for broader monitoring of private communications and potential for mass surveillance, according to a Thusday Politico report.
Lead negotiator and Chair of the Committee on Civil Liberties, Justice and Home Affairs in the European Parliament, Javier Zarzalejos, urged both the Council and Parliament to enter negotiations at once. He stressed the importance of establishing a legislative framework to prevent and combat child sexual abuse online, while respecting encryption.
“I am committed to work with all political groups, the Commission, and member states in the Council in the coming months in order to agree on a legally sound and balanced legislative text that contributes to effectively prevent and combating child sexual abuse online,” he stated.
The Council celebrated the latest efforts to protect children from sexual abuse online; however, former Dutch Member of Parliament Rob Roos lambasted the Council for acting similarly to the “East German era, stripping 450 million EU citizens of their right to privacy.” He warned that Brussels was acting “behind closed doors,” and that “Europe risks sliding into digital authoritarianism.”
Telegram founder and CEO Pavel Durov pointed out that EU officials were exempt from having their messages monitored. He commented in a post on X, “The EU weaponizes people’s strong emotions about child protection to push mass surveillance and censorship. Their surveillance law proposals conveniently exempted EU officials from having their own messages scanned.”
Related: Advocacy groups urge Trump to intervene in the Roman Storm retrial
Privacy on trial in broader global crackdown
The latest movement on Chat Control lands in the middle of a broader global crackdown on privacy tools. European regulators and law‑enforcement agencies have pushed high‑profile cases against crypto privacy projects like Tornado Cash, while US authorities have targeted developers linked to Samurai Wallet over alleged money‑laundering and sanctions violations, thrusting privacy‑preserving software into the crosshairs.
In response, Ethereum co‑founder Vitalik Buterin doubled down on the right to privacy as a core value. He donated 128 ETH each (roughly $760,000) to decentralized messaging projects Session and SimpleX Chat, arguing their importance in “preserving our digital privacy.”
Session president Alexander Linton told Cointelegraph that regulatory and technical developments are “threatening the future of private messaging,” while co-founder Chris McCabe said the challenge was now about raising global awareness.
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Australia’s government has introduced a new bill that will regulate crypto platforms under existing financial services laws after an industry consultation saw cautious support for the legislation.
Assistant Treasurer Daniel Mulino introduced the Corporations Amendment (Digital Assets Framework) Bill 2025 on Wednesday, which would require crypto companies such as exchanges and custody providers to obtain an Australian Financial Services License (AFSL).
“Across the world, digital assets are reshaping finance,” Mulino told the House on Wednesday. “Australia must keep pace. If we get this right, we can attract investment, create jobs and position our financial system as a leader in innovation.”
The Treasury launched a consultation over a draft of the bill in September, which Mulino told crypto conferencegoers was “the cornerstone” of the Albanese Government’s crypto roadmap released in March.
The local crypto industry largely supported the draft legislation, but many told the consultation that the bill needed further clarity and simplification.
New bill to include safeguards for crypto held for clients
Mulino told the House it’s currently possible for a company to hold an unlimited amount of client crypto “without any financial law safeguards,” adding the risks of scams or frauds like FTX “cannot be ignored.”
“This bill responds to those challenges by reducing loopholes and ensuring comparable activities face comparable obligations, tailored to the digital asset ecosystem,” he said.
Currently, crypto platforms that simply facilitate trading only need to register with the Australian Transaction Reports and Analysis Centre, which has 400 registered crypto exchanges, many of which are inactive.
The legislation would focus on the companies that hold crypto for customers, “rather than the underlying technology itself,” Mulino added. “This means it can evolve as new forms of tokenisation and digital services emerge.”
Crypto bill adds two new license types, exempts small players
The bill amends the Corporations Act to create two new financial products, a “digital asset platform” and a “tokenized custody platform,” both of which will need an AFSL.
The license will register the platforms with the Australian Securities and Investments Commission. Currently, only exchanges that sell “financial products,” such as derivatives, must register.
Mulino said anyone “advising on, dealing in, or arranging for others to deal in” crypto will be treated as providing a financial service that requires a license.
Related: Australia risks ‘missed opportunity’ by shirking tokenization: Top regulator
Under the bill, crypto and custody platforms must meet ASIC’s minimum standards for transactions, settlements and holding customer assets. They must also give a guide to clients explaining their service, fees and risks.
Mulino said the bill exempts “small-scale” companies from licensing, those with less than 10 million Australian dollars ($6.5 million) in transaction volume in 12 months, along with those that deal or advise on platforms “incidental to their main, non-financial activities.”
The bill outlines an 18-month grace period on licensing, which Mulino said gives “relief for businesses trying to do the right thing.”
The bill is likely to quickly pass the House, where Prime Minister Anthony Albanese’s center-left Labor Party holds a 94-seat majority. It will then head to the Senate, where Labor may need the support of the crossbench and opposition to pass it.
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