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Why Can’t ASI in Poland Invest in Cryptocurrencies?

The Supreme Administrative Court (NSA), in a final ruling (case no. II GSK 883/20), judged that entities managing Alternative Investment Companies (ASI) cannot be registered if their main object of investment is cryptocurrencies.

This ruling is significant for the practice of cryptocurrency trading, as it limits the scope of ASI’s investment activities. The Voivodship Administrative Court (WSA) and later the Supreme Administrative Court (NSA) fully supported the arguments presented by the Financial Supervision Commission (KNF), which denied entry into the Register of ASI Managers (the Register).

NSA in a final ruling (case no. II GSK 883/20), judged that entities managing Alternative Investment Companies (ASI) cannot be registered if their main object of investment is cryptocurrencies.

Examining the Core of the Dispute

The entrepreneur applying for registration with the Register attached, among other things, an ASI agreement. From the content of this document and the investment policy, it appeared that the activity was to focus on investment in digital currencies (cryptocurrencies). KNF, even before issuing a decision denying entry to the Register, required the entrepreneur to demonstrate that the ASI manager would be able to safeguard the interests of investors.

Despite the explanations submitted by the entrepreneur indicating that none of the elements of the future activities of the ASI are characterized by excessive risks for market participants, KNF assessed that it could not register the ASI management entity. 

What were the reasons for the negative decision?

  • The adopted business model based on investment in cryptocurrencies does not safeguard the interests of investors – the entrepreneur’s explanations in this regard were deemed unreliable, which is one of the prerequisites for obtaining registration.
  • The highly volatile nature of the cryptocurrency market.
  • Lack of legal guarantees to protect investors in case of, for example, a hacking attack on a cryptocurrency exchange.
  • Unfavorable construction of the ASI contract for investors, depriving them of de facto control over the manager’s actions, despite the fact that investors bear the economic burden and risk of the investment.

Each of the aforementioned premises was upheld by the administrative courts examining the parties’ dispute. Moreover, the administrative courts did not share the position of the entrepreneur referring to the constitutional protection of economic freedom (no ban on the appointment of an ASI investing in cryptocurrencies).

An analysis of the justification of the judgment leads to the conclusion that NSA attached particular importance to two factors: he cryptocurrency market considered “price shaky” and the lack of (at the time) legal regulation of cryptocurrencies.

Impact on the Fintech Industry

NSA attached particular importance to two factors: he cryptocurrency market considered "price shaky" and the lack of (at the time) legal regulation of cryptocurrencies.

The judgment handed downplays a significant role for the Fintech industry, although some arguments presented will soon lose relevance, because of the entry into force of the Regulation of the European Parliament and of the Council on Cryptoasset Markets (MiCA), amending Directive (EU)) 2019/1937.

It is worth considering whether the position of the administrative courts will be changed in the near future in the new legal state.

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Author team leader DKP Legal MARCIN WASZAK
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