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Banking and payment services: New KNF draft Guidelines on cryptocurrency

Banking and payment services: New KNF draft Guidelines on cryptocurrency

On July 16th 2020 Polish regulator Financial Supervision Committee (KNF) published draft guidelines on matters related with issuance and trade in cryptocurrency. The draft is currently consulted with representatives of the financial market.

The draft consists of two main parts:

  1. dictionary, within which KNF introduces (non-legal) definitions of the most significant terms related with cryptocurrency, blockchain and DLT (distributed ledger technology),
  2. regulatory assessment of different types of tokens

The summary would be the following:

  1. there is no act / regulation introducing a set of special rules for issuance / trade / storage / exchange etc. of cryptocurrency. As a consequence:
    1. market participants should make use of the general rule of law saying that what is not prohibited is allowed,
    2. different kinds of DLT tokens - depending on their specific properties - can be regulated by various Acts, including in particular the AML Act, Payment Services Act (PSA), Financial Instruments Trading Act (FIT)
  2. KNF differentiates the following token types:
    1. currency tokens (cryptocurrencies), including:
      1. native currency tokens (a currency generated autonomously by the mechanism of a given trading platform, e.g. Bitcoin),
      2. non-native currency tokens (tokens issued by a certain entity, e.g. Ripple)
    2. utility tokens (crypto-assets with functionality close to discount coupons, gift cards or vouchers)
    3. investment tokens, including those with properties similar to:
      1. security
      2. participation title in undertakings for collective investment
      3. other financial instruments
    4. hybrid tokens (possessing properties of at least two different token types, e.g. currency/investment tokens)
  3. According to KNF different activities related to different kinds of tokens can be treated differently, for example:
    1. activities involving: storage (crypto-wallets), and cryptocurrency exchange shall require a license for providing payment services (e.g. bank, e-money institution, small payment institution, national payment institution), plus such activities are subject to AML Act requirements (as obliged institution)
    2. providing the platform to create / dig native cryptocurrency shall not be a regulated activity, as native cryptocurrencies are not considered as electronic money (there is no issuer, no property of universal means of payment) - please note that this does not exclude the potential application of AML Act requirements
    3. issuance of non-native cryptocurrency shall be treated as regulated activity (issuance of electronic money), which requires a specific license (bank, e-money institution or national payment institution, please note that national payment institution has certain limitations as far as e-money issuance is concerned)
    4. issuance of currency tokens / cryptocurrency, the value of which is linked to value of an external indicator (e.g. price of gold) can be treated as financial activity, which requires a specific license (bank, investment firm)
    5. most investment and hybrid tokens require specific analysis, quite often leading to a conclusion that investment firm license is required.

Even though the KNF guidelines are not binding and are not an official interpretation of law, they will surely be respected by all Polish authorities.

We invite you to contact our Law Firm, which offers services such as:

  1. payment services,
  2. representation in front of KNF and banks,
  3. obtaining the status of small payment institution (MIP / SPI),
  4. obtaining the national payment institution license (KIP),
  5. legal design of internal systems and bye-laws so that they comply with EBA and KNF guidelines.


Piotr Putyra

Lawyer

Piotr Putyra

Barrister, Partner

Piotr Putyra

Contact:

Rondo ONZ 1
00-124 Warsaw