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.
Krasovka speaks at theGlobal Government Fintech Lab 2022 conference. Source: Global Government Fintech
“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.
“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.
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
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].”
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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Investment firms with Bitcoin-focused treasuries are front-running global Bitcoin adoption, which may see the world’s first cryptocurrency soar to a $200 trillion market capitalization in the coming decade.
Institutions and governments worldwide are starting to recognize the unique monetary properties of Bitcoin (BTC), according to Adam Back, co-founder and CEO of Blockstream and the inventor of Hashcash.
“$MSTR and other treasury companies are an arbitrage of the dislocation between the bitcoin future and todays fiat world,” Back wrote in an April 26 X post.
“A sustainable and scalable $100-$200 trillion trade front-running hyperbitcoinization. scalable enough for most big listed companies to move to btc treasury,” he added.
Hyperbitcoinization refers to the theoretical future where Bitcoin soars to become the largest global currency, replacing fiat money due to its inflationary economics and growing distrust in the legacy financial system.
Bitcoin’s price outpacing fiat money inflation remains the main driver of global hyperbitcoinization, Back said, adding:
“Some people think treasury strategy is a temporary glitch. i’m saying no it’s a logical and sustainable arbitrage. but not for ever, the driver is bitcoin price going up over 4 year periods faster than interest and inflation.”
Back’s comments come nearly two months after US President Donald Trump signed an executive order to establish a national Bitcoin reserve from BTC forfeited in government criminal cases.
Continued Bitcoin investments from the likes of Strategy, the largest corporate Bitcoin holder, may inspire more global firms to follow suit.
Strategy’s approach is proving to be lucrative, with the firm’s Bitcoin treasury generating over $5.1 billion worth of profit since the beginning of 2025, according to Strategy’s co-founder, Michael Saylor.
Japanese investment firm Metaplanet, also known as “Asia’s MicroStrategy,” adopted a similar strategy, since surpassing 5,000 BTC in total holdings on April 24, Cointelegraph reported.
As Asia’s largest corporate Bitcoin holder, Metaplanet plans to acquire 21,000 BTC by 2026.
US financial institutions may also have more confidence in adopting Bitcoin after the US Federal Reserve withdrew its 2022 guidance discouraging banks from engaging with cryptocurrency. “Banks are now free to begin supporting Bitcoin,” Saylor said in response to the guidance withdrawal.
“Banks will now be supervised through normal processes, signaling a more open regulatory environment for digital asset integration,” Nexo dispatch analyst Iliya Kalchev told Cointelegraph.
SEC Commissioner and head of the crypto task force, Hester Peirce, says US financial firms are navigating crypto in a way that’s similar to playing the children’s game “the floor is lava,” but in the dark.
“It is time that we find a way to end this game. We need to turn on the lights and build some walkways over the lava pit,” Peirce said at the SEC “Know Your Custodian” roundtable event on April 25.
The lava is crypto, says Peirce
Peirce explained that SEC registrants are forced to approach crypto-related activities like “the floor is lava,” where the aim is to jump from one piece of furniture to the next without touching the ground, except here, touching crypto directly is the lava.
“A D.C. version of this game is our regulatory approach to crypto assets, and crypto asset custody in particular,” she said.
Peirce said that, much like in the game, firms wanting to engage with crypto must avoid directly holding it due to unclear regulatory rules. “To engage in crypto-related activities, SEC-registrants have had to hop from one poorly illuminated regulatory space to the next, all while ensuring that they never touch any crypto asset,” Peirce said.
Peirce said that investment advisers are often unsure which crypto assets qualify as securities, what entities count as qualified custodians, and whether “exercising staking or voting rights” could trigger custody violations.
“The twist in the regulatory version is that it is largely played in the dark: burning legal lava and no lamps to illuminate the way.”
Peirce also said that a broker or ATS that cannot custody or manage crypto assets will struggle to facilitate trading, making it unlikely for a “robust market” to develop.
Echoing a similar sentiment, SEC Commissioner Mark Uyeda said at the event that as more SEC registrants work with crypto assets, it’s essential that they have access to custodial options that meet legal and regulatory requirements.
Uyeda said the agency should consider letting advisers use “state-chartered limited-purpose trust companies” with the authority to hold crypto assets as qualified custodians.
Meanwhile, the recently sworn-in chair of the SEC, Paul Atkins, said that he expected “huge benefits” from blockchain technology through efficiency, risk mitigation, transparency, and cutting costs.
He reiterated that among his goals at the SEC would be to facilitate “clear regulatory rules of the road” for digital assets, hinting that the agency under former chair Gary Gensler had contributed to market and regulatory uncertainty.
“I look forward to engaging with market participants and working with colleagues in President Trump’s administration and Congress to establish a rational fit-for-purpose framework for crypto assets,” said Atkins.
On the banks of the Mersey, Runcorn and Helsby is a more complicated political picture than the apparent Labour heartland that first presents itself.
Yes, there are industrial and manufacturing areas – an old town that’s fallen victim to out-of-town shopping, and an out-of-town shopping centre that’s fallen victim to Amazon.
But there are also more middle-class new town developments, as well as Tory-facing rural swathes.
Image: Space Cafe director Marie Moss says a sense of community has faded
One thing this area does mirror with many across the country, though, is a fed-up electorate with little confidence that politics can work for them.
In the Space Cafe in Runcorn Old Town, its director Marie Moss says many in the region remember a time when a sense of community was more acute.
“People were very proud of their town… and that’s why people get upset and emotional as they remember that,” she says.
It’s this feeling of disenfranchisement and nostalgia-tinged yearning for the past that Reform UK is trading off in its targeting of traditional Labour voters here.
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Party leader Nigel Farage features heavily on leaflets in these parts, alongside spikey messaging around migration, law and order, and Labour’s record in government so far.
Image: Runcorn 2024 result
Taxi driver Mike Holland hears frequent worries about that record from those riding in the back of his cab.
A Labour voter for decades, he says locals were “made up” at last year’s election result but have been “astonished” since then, with benefit changes a common topic of concern.
“Getting a taxi is two things, it’s either a luxury or a necessity… the necessity people are the disabled people… and a lot of the old dears are so stressed and worried about their disability allowance and whether they are going to get it or not get it,” he says.
But will that mean straight switchers to Reform UK?
Image: Taxi driver Mike Holland has voted for Labour for decades, but is now looking at the Lib Dems and Greens – or may not vote at all
Mike says he agrees with some of what the party is offering but thinks a lot of people are put off by Mr Farage.
He’s now looking at the Liberal Democrats and Greens, both of whom have put up local politicians as candidates.
Or, Mike says, he may just not vote at all.
It’s in places like Runcorn town that some of the political contradictions within Reform UK reveal themselves more clearly.
Many here say they were brought up being told to never vote Tory.
And yet, Reform, chasing their support, has chosen a former Conservative councillor as its candidate.
It’s no surprise Labour has been trialling attack lines in this campaign, painting Mr Farage’s party as “failed Tories”.
As a response to this, look no further than Reform’s recent nod to the left on industrialisation and public ownership.
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But head 15 minutes south from Runcorn docks, and this by-election campaign changes.
Rural areas like Frodsham and Helsby have, in the past, tended towards the Tories.
The Conservatives, of course, have a candidate in this vote, one who stood in a neighbouring constituency last year.
But Reform is now making a hard play for their supporters in these parts, with a softer message compared to the one being put out in urban areas – an attempt to reassure those anxious about too much political revolution coming to their privet-lined streets.
Labour, meanwhile, is actively trying to mobilise the anti-Farage vote by presenting their candidate – another local councillor – as the only person who can stop Reform.
Image: Makeup artist Nadine Tan is concerned about division and anger in the community
The pitch here is aimed at voters like Frodsham makeup artist Nadine Tan, who are worried about division and anger in the community.
“I think they need to kind of come together and stop trying to divide everyone,” she says.
But like Mike the taxi driver five miles north, disillusionment could be the eventual winner as Nadine says, despite the “thousands of leaflets” through her door, she still thinks “they all say the same thing”.
One factor that doesn’t seem to be swinging too many votes, though, is the insalubrious circumstances in which the area’s former Labour MP left office.
Image: Labour MP Mike Amesbury was convicted of punching a man in the street. Pic: Reuters
But across the patch, many praise their ex-MP’s local efforts, while also saying he was “very silly” to have acted in the way he did.
That may be putting it mildly.
But it’s hard to find much more agreement ahead of Thursday’s vote.
A constituency still hungry for change, but unsure as to who can deliver it.
Full list of candidates, Runcorn and Helsby by-election:
Catherine Anne Blaiklock – English Democrats Dan Clarke – Liberal Party Chris Copeman – Green Party Paul Duffy – Liberal Democrats Peter Ford – Workers Party Howling Laud Hope – Monster Raving Loony Party Sean Houlston – Conservatives Jason Philip Hughes – Volt UK Alan McKie – Independent Graham Harry Moore – English Constitution Party Paul Andrew Murphy – Social Democratic Party Sarah Pochin – Reform UK Karen Shore – Labour John Stevens – Rejoin EU Michael Williams – Independent