Last month the Polish government published a draft act on crypto-assets (the Draft Act) that aims to align the national legal framework with the EU regulation on crypto-assets. The Draft Act transposes the provisions of the EU’s Market in Crypto-Assets Regulation (the MiCA) and establishes additional supervisory measures for the crypto-assets market sector.
New Rules on Oversight
The Draft Act largely follows the existing regulatory models for other financial market sectors. It designates the Polish Financial Supervision Authority (KNF) as the supervisor of the crypto-asset market and gives it various supervisory powers, including the power to:
- audit the activities of: (i) issuers of asset-referenced tokens and issuers of e-money tokens, (ii) offerors, (iii) persons applying for admission to trading in crypto-assets, and (iv) crypto asset service providers (CASPs);
- grant authorisations to conduct activities in the field of crypto-assets;
- control the process of offering crypto-assets and applying for their admission to trading;
- supervise and control market participants in terms of compliance with legal regulations;
- impose administrative fines on entities violating legal provisions and obligations arising from the authorisations (up to PLN 20 million).
Liability for the information given in a crypto-asset white paper
The Draft Act also includes specific provisions on (civil) liability for the information provided in a crypto-asset white paper. In particular:
- it extends the liability to entities preparing or participating in the preparation of information included in white papers;
- the liability for the information included in the crypto-asset white paper is to be joint and several and cannot be limited or excluded towards third parties. However, entities subject to the liability will be allowed to conclude an agreement setting out the rules for mutual settlements and indemnification;
- entities responsible for a crypto-asset white paper will have to exercise due care in line with the professional character of their activities.
Blocking of IP Addresses and Freezing Assets
The KNF is to maintain a register of internet domains and IP addresses used by CASPs in case they operate without the required authorisation or violate the MiCA provisions (in the latter case only if “there are no other effective measures to stop the violation”). Access to domains and IP addresses contained in the register is to be blocked by telecommunication service providers.
The KNF will also have the power to order the blocking of distributed ledger addresses and bank accounts for up to 96 hours, which may then be extended by a public prosecutor for six months in case there is a justified suspicion of a certain crime relating to crypto-asset business being committed.
Fees
The Draft Act imposes an obligation to pay fees in connection with: (i) granting authorisation to offer asset-referenced tokens (EUR 4,500), (ii) granting CASP authorisation or extending its scope (EUR 4,500), (iii) the KNF reviewing the passporting notification (EUR 4,500), and (iv) approving a crypto-asset white paper as referred to in Article 17(1)(a) of the MiCA.
CASPs and issuers of asset-referenced tokens will also be required to pay annual fees to cover the costs of KNF supervision. For CASPs the fees will amount to the average revenue from the provision of crypto-assets services in the last three financial years preceding the year for which the payment is due, in an amount not greater than 0.5% of this average, but not less than the PLN equivalent of EUR 750 . Issuers of asset-referenced tokens will be obliged to pay an annual fee of the PLN equivalent of EUR 750.
Market Reactions
The proposals of the Draft Act have met with considerable opposition from market participants, who argue that they impose excessive entry barriers for CASPs. The main concern is the high level of supervisory fees that CASPs would have to pay, which are much higher than those applicable to some other local financial institutions (eg local payment institutions). This could discourage or exclude many small CASPs from operating in the Polish market. The Draft Act has also been criticized for not providing any incentives or measures to foster market development. Moreover, it has given the KNF powers that could be used without adequate judicial oversight or remedy (such as ordering the freezing of crypto assets).
It should be noted that the Draft Act is still subject to consultation and its final text may undergo further changes.
Entry into Force
According to the assumptions of the Council of Ministers, the entry into force of the Draft Act is to be correlated with the dates when the MiCA starts to apply (ie on 30 June 2024 and 30 December 2024). This means that there is not much time left for improvements.
