Lithuania shrinks its fintech hub, exposing EU payment risks
The Bank of Lithuania is revoking more fintech licences than it grants, exposing a structural flaw in how the EU polices cross-border payments for the whole bloc.
Lithuania’s central bank revoked nine electronic money and payment licences in 2024 while issuing just three. The retreat marks a sharp reversal for a country that positioned itself as the EU’s premier fintech gateway after Brexit stripped London of its financial passporting rights.
At the end of last year, Lithuania supervised 119 such institutions. Together, they moved €152bn across the single market in 2024, with 10 firms handling roughly two-thirds of that flow. All of it was policed by a single national regulator in a nation of fewer than three million people.
This arrangement relies on home-state control, an EU rule allowing a firm licensed in one member state to operate anywhere in the bloc. Unlike banks, which answer to the European Central Bank, these payment firms answer only to their home authority. Their customers’ funds lack deposit guarantees, relying instead on segregated accounts checked solely by the Lithuanian supervisor.
The result is regulatory arbitrage where the supervisory burden stays in Vilnius but the political and financial fallout lands in host states from Portugal to Poland. A passported failure would be worse than the 2020 Wirecard collapse, because the countries absorbing the damage would never have had the power to issue or withdraw the licence.
Revolut demonstrated the industry's evolutionary path. It built its European base in Vilnius but converted its payments arm into a licensed bank in 2022, climbing into the ECB's supervised tier and securing a deposit guarantee. The hundreds of smaller firms left behind in the e-money regime have no such safety net.
Brussels now acknowledges the vulnerability. In November 2025, EU lawmakers provisionally agreed on PSD3 and a new Payment Services Regulation to tighten the e-money regime. In December, the European Commission proposed handing supervision of all crypto firms to the central EU body, ESMA.
Neither measure resolves the immediate problem. The payments package still leaves authorisation and prudential supervision at the national level, and the crypto plan remains a proposal. Crucially, no existing rulebook can reach back to unwind the decade of light-touch licences already passported across the continent, leaving a vast volume of flows operating under a structure the EU is now trying to abandon.
