Draft law on crypto-assets – new regulations on the horizon

On 23 February 2024, the Polish government published a draft law on crypto-assets (hereinafter: “Draft”). This is the implementation of the adoption by the European Parliament and the Council (EU) of Regulation 2023/1114, the so-called MiCA. The Draft provides for the introduction of new regulations for the crypto market in Poland, including for entities operating in the field of virtual currencies (VASPs).

Supervision of the crypto-asset market

One of the most significant innovations introduced by the Draft is entrusting the Polish Financial Supervision Authority (KNF) with supervising the crypto-asset market. The KNF may audit the activities of:

1. issuers of asset-referenced tokens or e-money tokens,
2. offerors,
3. applicants for crypto-asset trading,
4. crypto-asset service providers.

The most important powers of the KNF are to include:

• issuing licenses for crypto-asset activities
• supervision and control of market participants in terms of compliance with legal regulations, including AML
• imposing administrative sanctions and fines on entities violating the law and obligations resulting from the granted permit.

Obtaining a license to conduct cryptocurrency activities

The conditions for obtaining authorisation for crypto-asset activities will vary depending on the type of crypto-asset and the activity associated with it. As a rule, it will be necessary to submit an application to the KNF identifying the entity applying for the permit, and the application must be accompanied by:

• programme of activities,
• proof of compliance with the requirements for required own funds,
• a description of the principles of VASP management,
• a description of the rules for the operation of the trading platform (if applicable);
• a description of the procedure and system for detecting market abuse;
• description of ITC systems and security solutions.

The regulator then has 3 months to process the application. If you want to do business in other EU Member States, you will need to report it to the supervisory authorities in that country.

Penalties for violating the Crypto-Assets Act and MiCA Regulation

The Draft provides for very severe penalties for entities that violate the provisions of the Act on crypto-assets, including criminal liability, among others:

• A breach of the duty to act honestly, fairly and professionally (Article 59 of MiCA) may result in:
  • revocation of the license,
  • prohibition of crypto-asset services;
  • a fine for the person responsible for the infringement in the amount of up to 3,119,700 PLN,
  • a fine on the VASP in the amount of 22,284,000 PLN or 5% of the total revenue,

• Providing false information or concealing true information in an information document (white paper) relating to asset-linked tokens or e-money tokens may result in:
  • a fine of up to 5,000,000 PLN,
  • imprisonment for up to 5 years.

When will the new rules come into force?

The Act is currently at the consultation stage, after which it may be subject to significant changes. Subsequently, the Draft will be further processed by the Polish Parliament and then it will require the signature of the President of the Republic of Poland. According to the Draft, most of the new regulations will enter into force on 30 June 2024.