CRYPTOCURRENCY TRADING PLATFORM – LEGAL STATUS AND REGULATIONS IN THE POLISH JURISDICTION

Definition of cryptocurrency in Polish regulatory law (DIGITAL VALUE IMAGE)

According to the key legal definition of the Polish Anti-Money Laundering and Terrorist Financing Act of March 1, 2018, a virtual currency in Polish regulatory law is understood as a digital representation of a value that is not:

a) legal tender issued by the National Bank of Poland, foreign central banks or other public administration bodies,

b) an international unit of account established by an international organization and accepted by individual countries belonging to this organization or cooperating with it,

c) electronic money within the meaning of the Polish Act of August 19, 2011 on payment services,

d) a financial instrument within the meaning of the Act of July 29, 2005 on Trading in Financial Instruments,

e) a bill or a check.

The above legal definition of virtual money in Poland, in addition to the so-called negative list (that is, an indication on the list of those securities that are not electronic money) also includes the second condition.
It is a digital representation of value that is exchangeable in business transactions for legal tender and accepted as a medium of exchange, as well as a digital representation of value that can be electronically stored or transferred or can be the subject of electronic commerce.

AML 6 Directive – the new European Supervisory Authority of the future (AMLA)

Legal regulations in Poland are closely related to the EU ones. The policy of the European Union is becoming more and more restrictive, this is due to the fact that currently cryptocurrencies are a very frequently used means, and their virtual nature increases the risk of crimes. The institutions of the European Union, the G20 and the Special Group on Counteracting Money Laundering warn against the dangers of using virtual currencies, such as: money laundering, supporting terrorism, and the creation of financial pyramids. Therefore, under the Anti Money Laundering 6 (AML) directive, the European Union intends to introduce a new institution to secure the use and trading of virtual currencies – the Anti-Money Laundering Authority (AMLA). A preliminary agreement on the existence of this institution was concluded in June 2022. Another action of the Community is to introduce the Markets in Crypto -Assets package by the end of 2023, which will also impose legal barriers on the virtual currencies market.

Legal status of cryptocurrency in Poland – the latest approach of the Polish supervisory authority
In Poland, cryptocurrency activity is regulated in the sense that the Polish legal order takes into account the obligations of the AML 4 and AML 5. However, cryptocurrency activity is not fully under the supervision of the Polish Financial Supervision Authority (KNF), because the cryptocurrency market is still not part of the financial market.

Therefore, in June 2022, the Polish supervisory authority over the financial market, including conventional financial institutions, such as, for example, banks, issued a recommendation on caution when making transactions in cryptocurrencies due to the war in Ukraine. However, the recommendation has no legal effect on cryptocurrency traders, and this is due to the aforementioned lack of supervision.
The most important legal act in Poland regarding cryptocurrencies is the above-mentioned Polish Act on Counteracting Money Laundering and Terrorism Financing of March 1, 2018, which, after amendment, is the equivalent of the EU Directive 4 and 5 AML.

Bitcoin in Poland without VAT – As much as 19% CIT

Cryptocurrency trading is exempt from tax on goods and services, which results from the ruling of the Court of Justice of the European Union CJEU (C-264/14) and the Act on tax on goods and services of March 11, 2004. The turnover is also exempt from tax on civil law transactions (PCC). However, the corporate income tax (CIT) is 19%.

Cryptocurrency and Buyer Data Protection

The protection of personal data related to cryptocurrency activities is closely connected with the Blockchain technology. It is a technology that stores and transmits information about transactions that have been concluded on the Internet. Its important element is that there is no single central computer, and each computer can take part in transactions, which raises the problem of the lack of one personal data administrator.
Consequently, personal data claims can be very difficult to pursue. However, the undoubted advantage of Blockchain is a very strong protection against cyber-attacks, which results from the mentioned lack of one central computer.

Cryptocurrency trading registration in Poland – rules

Business registration is not a very complicated process, but requires meeting several conditions. In accordance with the European Union directive AML5 and the Act on counteracting money laundering and terrorist financing of March 1, 2018, activities related to cryptocurrencies should be registered.
The basic legal information about registration of the cryptocurrency trading platform on the Polish market is:

1. There is a one centralized register in Poland – entry via the ePUAP internet platform – the registration cost is PLN 616.00;
2. It is a regulated activity and can be started after being entered in the register. Entry in the register takes place within 14 days of submitting the application, a declaration of compliance with the conditions required by law to perform activities in the field of virtual currencies and a declaration of good conduct (not equivalent to a certificate, it is a self-signed declaration) must be attached. The entry condition is to have experience and knowledge of virtual currencies. Its fulfilment is equivalent to:

• completion of a training or course covering legal or practical issues related to the activity in the field of virtual currencies, or,
• performing, for a period of at least one year, activities related to activities in the field of virtual currencies.

The above conditions must be confirmed by appropriate documents, for example, an extract from the Central Register and Information on Economic Activity confirming the conduct of business, along with documents confirming that the entrepreneur has performed activities related to the activity in the field of virtual currencies for at least a year. The evidence of crypto currency trading experience can also be demonstrating the list of contracts concluded with customers from this period.

With regard to courses and training – Polish law does not specify the permissible category of courses / training. The course / training is to cover legal or practical issues related to the activity in the field of virtual currencies. The document must confirm the completion of such training.

To obtain an entry, it is not necessary to submit documents, but a signed declaration (as in the case of no criminal record) is sufficient.

3. Running a business without registration may be punished with a fine of up to PLN 100,000.
4. In the event of refusal to make an entry – there is no possibility of appeal, one can submit an application for reconsideration of the case directly to the Director of the Tax Administration Chamber in Katowice via the ePUAP internet platform or in writing.
5. Running the electronic platform may be suspended by crypto trader.
6. The authority may ex officio remove the entity from the register if:

• the entity has been deleted from the Polish Central Register and Information on Economic Activity (in the case of registration of business activity as a natural person) or the National Court Register (in the case of capital companies),
• failure by the entity to meet the requirements set out by law – submission of a statement confirming the accuracy of the data included in the entrepreneur’s application for entry into the register, contrary to the facts.

3. Deletion takes place by way of a Polish administrative decision.

The role of the Polish Financial Supervision Authority in cyber trade in virtual currency (Polish Financial Supervision Authority and its role and the tightening of regulatory law)

The subject of activity of platforms offering cryptocurrencies is, in the light of the existing Polish regulations, the so-called “intermediation in the exchange of cryptocurrencies and crypto assets”.

The provisions of Chapter 11a of the Polish Act on Counteracting Money Laundering and Terrorism Financing implement the requirements of the amended Art. 47 paragraph. 1 of Directive 2015/849 (Directive 4 AML). According to this provision, Member States are required to ensure that providers of currency exchange services between virtual currencies and fiat currencies are required to obtain registration, and that entities providing services to trusts or companies are required to obtain authorization or registration.

Pursuant to recital 51 of the preamble to Directive 2015/849, the purpose of this type of regulation is to protect these entities from being used by their managers or their beneficial owners for criminal purposes. Correct transposition of the provision of Article 47 (1) of Directive 2015/849, as amended by Article 1 (29) of Directive 2018/843, requires to extend anti-money laundering protection on the activities consisting in the provision of services referred to:

1) in article 2, paragraph 1, point 12 of the Polish Act on counteracting money laundering and financing of terrorism, i.e. the activities of entities conducting economic activity consisting in the provision of services in the field of:

• a) exchanges between virtual currencies and means of payment,
• b) exchanges between virtual currencies,
• c) intermediation in the exchange referred to in letter a or b,
• d) keeping the accounts understood as a collection of identification data kept in an electronic form, providing authorized persons with the possibility of using virtual currency units, including carrying out transactions of their exchange;

2) in article 2, paragraph 1, point 16 of the Polish Act on counteracting money laundering and terrorist financing, i.e. the activities of entities conducting economic activity consisting in the provision of services in the field of:

• a) creating a legal person or an organizational unit without legal personality,
• b) performing the function of a management board member or enabling another person to perform this function or a similar function in a legal person or an organizational unit without legal personality,
• c) providing a registered office, business address or correspondence address and other related services to a legal person or an organizational unit without legal personality,
• d) acting or enabling another person to act as a trustee of a trust established through legal action,
• e) acting or allowing another person to act as a person exercising stocks or shares for an entity other than a company listed on a regulated market that is subject to disclosure requirements under European Union law or subject to equivalent international standards.

Therefore, economic activity consisting in the provision of services referred to in article 2, paragraph 1, point 12 and in point 16 of the Polish act on counteracting money laundering and financing terrorism, is a regulated activity in Poland, and therefore, the possibility of its performance in Poland depends on the obligation to be entered in the relevant register within the meaning of the requirements under the provisions of Directive 2015/849.

Despite the fact that Poland has implemented Directive 4 and 5 of the AML into the Polish legal order, and thus the fact that the cryptocurrency market has its register kept by the Polish Tax Office since spring 2022, this market remains a market not subject to supervision by the Polish Financial Supervision Authority as part of the financial market within the meaning of Article 2 of the Act of 21 July 2006 on supervision over the financial markets (consolidated text, Journal of Laws of 2022, item 660 as amended).

Therefore, from the perspective of Polish regulations on financial market supervision, the crypto- assets and cryptocurrencies market is not a regulated market within the meaning of these regulations, in particular the Act of July 21, 2006 on financial market supervision (consolidated text, Journal of Laws of 2022, item 660 as amended). The cryptocurrency and crypto-assets market (with the exception of investment tokens, which have features similar to financial instruments both in Poland and in other countries) do not have any specific regulation in this regard. As it is not a part of the financial market within the meaning of the Act of 21 July 2006 on financial market supervision, it is not subject to supervision by the Polish Financial Supervision Authority. As it is an unregulated market, there are also no detailed and systemic solutions ensuring the safety of investors and facilitating their possible pursuit of claims from unreliable entrepreneurs.

Pursuant to the Polish Act of June 10, 2016 on the Bank Guarantee Fund, the deposit guarantee system and resolution, the funds of natural persons deposited in a bank account are protected up to the sum of EUR 100,000.00 in full. With regard to the capital market, pursuant to Article 133 of the Act of July 29, 2005 on Trading in Financial Instruments, there is a compensation system operated by the National Depository for Securities. The purpose of the compensation system is to provide investors with payments up to the amount specified in the Act, cash and to compensate for the value of lost financial instruments collected by them in brokerage houses, including in their branches outside the territory of the Republic of Poland, for the services provided to them in the scope of activities, referred to in article 69 section 2 and section 4 point 1 of the Act on Trading in Financial Instruments in the event of, inter alia, declaration of bankruptcy or the opening of restructuring proceedings of a brokerage house.

Entities operating on the cryptocurrency market, which are not required by law to meet specific regulatory requirements, do not provide (read: they are not required from the perspective of financial market regulations) even similar mechanisms to protect the interests of investors. On the other hand, security mechanisms applied in relation to crypto assets result from individual decisions of given trading platforms, and their implementation is not verified by the supervisory authority. In the event of technical problems, loss of access to funds or other events leading to the loss of funds contributed by the client, the return of the capital contributed may be difficult or impossible.

In the event of a dispute between the client and the entity offering crypto asset services abroad, the law of another country may apply, and a judicial authority of another country may be competent. Investors, by placing their funds in crypto-assets, are not able to use the mechanisms specified in the Act of August 5, 2015 on the examination of complaints by financial market entities and the Financial Ombudsman. Thus, there are no mechanisms that simplify the pursuit of possible claims against entities from the broadly understood financial market.

The position and recommendations / warnings issued by the Polish Financial Supervision Authority regarding trade in crypto currency

The Polish Financial Supervision Authority – as the supervisory entity – issues positions and recommendations regarding trading in crypto currencies. Among other, there were recommendations issued on 12 January 2021 and on 10 December 2020. The content (in Polish) can be found below:

https://www.knf.gov.pl/knf/pl/komponenty/img/Ostrzezenie_UKNF_o_ryzykach_zwiazanych_z_nabyaniem_ o raz_z_obrotem_kryptoaktywami_72241.pdf

https: // www.knf.gov.pl/knf/pl/komponenty/img/Stanowisko_UKNF_ws_wydaniu_i_obrotu_kryptoaktywami_71794.pdf

The above position of the Polish supervisory authority remains valid, indicating the high risk associated with investing or entrusting funds as part of crypto asset purchase offers, including the risk of losing some or all of the invested funds, as indicated in the Announcement of the Polish Financial Supervision Authority of November 22, 2017.

The legal classification of crypto assets lies within the competence of Polish common courts as the only authority authorized to interpret the generally applicable law in relation to the specific facts that are the subject of the dispute. The position was prepared on the basis of the applicable provisions of Polish law and the provisions of European Union law, as well as the report of the European Banking Authority and the opinion of the European Securities and Markets Authority. The position is an activity carried out under the Digital Supervisory Agenda of the Polish Financial Supervision Authority.

In this regard, attention should be paid to the following rulings of Polish courts on cryptocurrency issues:

1) The Polish Supreme Administrative Court judgment of 4 August 2022 (https://orzeczenia.nsa.gov.pl/doc/C8296DC8B9):

According to this judgment, income from trading cryptocurrencies should be accounted for as income from property rights. The Polish Supreme Administrative Court has settled a dispute over the taxation of revenues obtained from trading in cryptocurrencies. This means the necessity to settle according to the tax scale, which may result in a tax on income of up to 32%. The ruling was issued after the Polish Supreme Administrative Court considered the case of the taxpayer who made transactions on the cryptocurrency market and did not notify the Tax Office about it. In the complex interpretation, the Tax Office explained that the tax was to be calculated on general principles, i.e. according to the tax scale rather than on the basis of the 19% flat rate from Art. 30a paragraph 1 point 3 of the Polish Personal Income Tax Act.

The Supreme Administrative Court confirmed that trading in cryptocurrencies via the Internet is classified as other monetary intermediation. As a consequence, these services are excluded from taxation in the form of a lump sum on recorded revenues. It is irrelevant for determining the nature of the services that the remuneration for such a service does not take the form of payment of a commission or other fees. The judgment is final. For the purposes of the tax on goods and services, the activity in the field of selling virtual currencies, pursuant to the CJEU judgment, was equated with the sale of money, and as a consequence, the statistical classification of such activity was changed to other financial intermediation (Polish Classification Code: 64.19.Z). At the same time, it is excluded from the possibility of using lump-sum taxation.

2) The Court of Justice of the European Union on October 22, 2015, issued a judgment in the Skatteverket case against David Hedqvist C 264/14 regarding the taxation of the cryptocurrency which is Bitcoin

In this regard, the following fragment of the judgment is decisive, according to which the Court of Justice of the European Union recognized bitcoins as a currency that can be paid throughout the European Union, and also stated that the conversion of traditional currency into virtual currency – Bitcoin – is exempt from VAT, both for natural persons and entrepreneurs:

“Referring to the 2012 report of the European Central Bank on virtual currencies, the referring court indicates that a virtual currency may be defined as a type of unregulated digital money, issued and controlled by the persons who create it, and used and accepted by members of a given community. The virtual currency “bitcoin” belongs to the system of virtual currencies from the so-called “two-way flow” by which users can buy and sell virtual money in accordance with exchange rates. These virtual currencies are similar to other convertible currencies in terms of their interoperability with the real world. Such systems allow you to purchase both virtual and real goods and services. Virtual currencies differ from electronic money as defined in Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking-up and pursuit of the business of electronic money institutions and the prudential supervision of their activities, and amending Directive 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC (OJ L 267, p. 7), since unlike money in virtual currencies, capital is not expressed in a traditional unit of account, for example in euro but in a virtual unit of account such as bitcoin.’

The judgment at issue is therefore based on the fact that, according to the tax law committee, the bitcoin virtual currency is a means of payment used in a manner that is compatible with legal tender. Moreover, the expression “legal tender” in Art. 135 sec. 1 lit. e) of the VAT Directive was used to clarify the scope of the exemption for banknotes and coins. It follows that that expression must be interpreted as relating only to banknotes and coins and not to currency. This interpretation is also in line with the purpose of the exemption laid down in Art. 135 sec. 1 lit. b) -g) of the VAT Directive, which consists in avoiding the difficulties that arise when taxing financial services with VAT.

The judgment subsequently states that “First of all, it should be stated that a virtual currency with a bidirectional flow of bitcoin, which will be exchanged for traditional currencies as part of an exchange transaction, cannot be considered a “thing” within the meaning of Art. 14 of the VAT Directive because, as the Advocate General stated in point 17 of her Opinion, its sole purpose is as a means of payment.

Consequently, the transactions at issue in the main proceedings which involve the exchange of different means of payment do not fall within the concept of ‘supply of goods’, as provided for in Article 14 of the directive. In these circumstances, these transactions constitute the provision of services within the meaning of Art. 24 of the VAT Directive.

(…) it should be recalled that according to the case law of the Tribunal, the exemptions referred to in Art. 135 sec. 1 of the VAT Directive are autonomous concepts of EU law which serve to avoid discrepancies in the application of the VAT system in individual Member States (in particular the judgments: Skandinaviska Enskilda Banken, C 540/09, EU: C: 2011: 137, paragraph 19 and the case-law cited therein, and DTZ Zadelhoff, C 259/11, EU: C: 2012: 423, paragraph 19).

(…) transactions that are exempt from VAT under these provisions are, by their nature, financial transactions, although they do not necessarily have to be carried out by banks or financial institutions (see Velvet & Steel Immobilien, C 455/05, EU: C: 2007: 232, paragraphs 21 and 22 and the case-law cited there, and Granton Advertisin, C 461/12, EU: C: 2014: 1745, point 29).

bitcoin virtual currency is contractual tender, on the one hand, it cannot be considered a current account, payment or transfer. On the other hand, unlike debts, checks and other negotiable financial instruments referred to in Art. 135 sec. 1 lit. d) of the VAT Directive, it is a direct means of payment between entrepreneurs who accept it.

It is common ground in the main proceedings that the sole purpose of bitcoin’s virtual currency is the function of a tender and that certain traders accept it for that purpose.’

Cryptocurrency exchanges – summary of the legal status in Poland

In the Polish legal system, there are no provisions prohibiting business activities as exchanges or cryptocurrency exchange offices, which means that operating in the territory of the Republic of Poland in the form of a cryptocurrency exchange or exchange office, as well as trading in cryptocurrencies, is not prohibited, and therefore legal.

However, it should be emphasized that from July 13, 2018, entities operating in the field of exchanges and cryptocurrency exchange offices have become obligated institutions within the meaning of the Act of March 1, 2018 on counteracting money laundering and financing of terrorism, and therefore must perform all the duties indicated therein.

The basic obligations of obligated institutions, and thus also exchanges and cryptocurrency exchange offices include:

1. appointment of an AML Officer or a member of the management board responsible for the implementation of the obligations set out in the Act (if the entity has a management board),

2. preparing an “internal” risk assessment and updating it,
3. analysis and assessment of the ML / FT risk generated by the client and the application of financial security measures to him, which should be documented,
4. introduction of the internal AML / CFT procedure,
5. fulfilling the training obligation,
6. informing the Polish Chief Inspector of Financial Information about transactions.

It should be remembered that failure to comply with these obligations of the cryptocurrency service provider is punishable by an administrative penalty (including a financial penalty or an order to cease specific activities by the obligated institution).

In addition, in the opinion of the Polish Financial Supervision Authority, conducting this activity may involve the performance of activities subject to legal regulations, and thus – the obligation to obtain appropriate permits or entries in the registers, e.g. permits for the provision of payment services in the field of maintaining payment accounts (so-called virtual purses) and execution of payment transactions specified in the Act of August 19, 2011 on payment services (Act on Payment Services). Consequently, this activity, as well as any other form of economic activity, must be carried out in full compliance with the applicable legal provisions.

Entities operating as exchanges and cryptocurrency exchange offices, which were entered on the “List of public warnings of the Polish Financial Supervision Authority”, in the opinion of the Polish Financial Supervision Authority, could have provided customers with payment services without the required authorization of the Polish Financial Supervision Authority, which constitutes a violation of Art. 150 sec. 1 of the Payment Services Act.

Pursuant to the Act on Payment Services, we understand payment services as activities involving, inter alia:
• maintaining a payment account and accepting cash payments and making cash withdrawals from the payment accounts,
• execution of payment transactions (transfer of funds accumulated on the payment account to the payee),
• issuing payment instruments (payment cards or applications enabling transfers),
• providing money transfer service (transfer of funds without using a payment account).

It is worth mentioning that, in order to meet the needs of the market, the Polish financial market regulatory authority established the Innovation Hub Program, under which it is possible to establish, together with the Polish Financial Supervision Authority, the legal and organizational framework of such activities in a way that ensures compliance of these entities with the law and the security of funds entrusted to them by customers.

Application of the AML Directive in Poland

The obligation to have an internal AML procedure results from Art. 50 of the Act on Counteracting Money Laundering and Terrorism Financing. According to this provision:
“Any obligated institution shall introduce an internal procedure for counteracting money laundering and terrorist financing, hereinafter referred to as” the internal procedure of the obligated institution.”
The above correlates with the content of Art. 2 clause 1 AMDL 5, which contains a catalogue of obliged entities. Among them there can be mentioned:

• banks, credit institutions and their branches, credit unions, National Credit Unions;
• domestic payment institutions, small payment institutions, acquirers;
• investment funds, alternative investment companies, TFI;
• investment companies, custodian banks and branches of foreign investment companies;
• insurance companies, insurance intermediaries;
• entities conducting currency exchange activities and entities providing services in the field of virtual currency exchange;
• lending institutions;
• entrepreneurs operating in the field of games of chance, mutual wagering, card games and slot machine games;
• postal operators.

The mere fact of accepting payments or making payments in cash in the amount of at least EUR 10,000 results in recognizing the entrepreneur as an obliged entity, and thus requires the implementation of the AML procedure, as well as the application of the regulations specified in the Act and the fulfillment of additional obligations imposed on it. As a result, just one transaction in excess of EUR 10,000 in cash may entail sanctions for the entrepreneur, provided that the entrepreneur fails to comply with the relevant statutory obligations.

The AML procedure is an individualized document, the content of which will basically depend on the type of the subject of activity, its size and characteristics. The regulations define in particular what the internal procedure should specify. Pursuant to Art. 50 sec. 2 of the Act:

“The internal procedure of the obligated institution shall define, taking into account the nature, type and size of the conducted activity, the rules of conduct applied in the obligated institution and shall include in particular:

1. actions or procedures taken to reduce the risk of money laundering and terrorist financing and to properly manage the identified ML / TF risk;
2. rules for identifying and assessing the risk of money laundering and terrorist financing related to a given business relationship or an occasional transaction, including rules for the verification and updating of the previously performed risk assessment of money laundering and terrorist financing;
3. measures applied for the proper management of the identified ML / TF risk related to the business relationship or occasional transaction concerned;
4. the principles of applying financial security measures;
5. rules for keeping documents and information;
6. rules of performing duties, including providing the Inspector General with information on transactions and notifications;
7. the principles of disseminating among the employees of the obligated institution the knowledge of the provisions on counteracting money laundering and financing of terrorism;
8. rules for reporting by employees actual or potential violations of the provisions on counteracting money laundering and terrorist financing;
9. principles of internal control or supervision of compliance of the activities of the obligated institution with the provisions on counteracting money laundering and terrorist financing as well as the rules of conduct specified in the internal procedures.”

The AML system in Poland consists of all entities obliged to comply with legal regulations related to counteracting money laundering and financing of terrorism. Their actions, rights and obligations are regulated by the AML Act of March 30, 2021 amending the Act on Counteracting Money Laundering and Terrorism Financing and some other acts, as well as the provisions of the 5 AML Directive. The AML Act specifies that the financial information authorities in Poland are those government administration bodies that are authorized to conduct matters related to the prevention of the introduction to financial circulation of property values derived from illegal or undisclosed sources.
These authorities are

• the minister authorized to conduct matters relating to financial institutions – it is the supreme body of financial information;
• General Inspector of Financial Information – it performs its tasks within the organizational unit separated for this purpose within the structure of the Ministry of Finance.

ENTRY IN THE PROPER REGISTER

As already indicated at the beginning of the article, at the turn of 2021/2022, economic activity in the field of virtual currencies became partially a regulated activity.

For the entity dealing with:

• exchange between virtual currencies and means of payment,
• exchange between virtual currencies,
• mediation in this type of exchange,
• maintenance of derivatives accounts (derivatives within the meaning of the Act on Trading in Financial Instruments),

there has been introduced the obligation to register in a special register.

The above-mentioned four categories of activities together constitute “virtual currencies activities” within the meaning of the Act on Counteracting Money Laundering and Terrorism Financing (AML).

The need for Poland to keep this type of register results from the provisions of European Union law, namely Directive 2018/843 of May 30, 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for money laundering or terrorist financing (Act on AML). The provisions of this Directive oblige Member States to require entities engaged in the activity of virtual currencies to obtain a permit or be entered in a register.

The provisions governing the obligation to make an entry and the registration procedure are contained in the AML Act. In addition, on July 1, 2021, the Polish Ministry of Finance, Funds and Regional Development published a draft regulation on the application for entry in the register of activities in the field of virtual currencies.

The possibility of entry in the register is provided for both natural and legal persons as well as organizational units without legal personality (e.g. general partnership, partnership, limited partnership or limited joint-stock partnership). In all cases, it was subject to conditions, mainly relating to the impunity of certain persons for certain crimes.

Activities in the field of virtual currencies may be conducted by a person who has not been convicted of an intentional crime against the activities of state institutions and local government, against the administration of justice, against the credibility of documents, against property, against economic turnover and property interests in civil law transactions (e.g. extortion of a loan or money laundering), against trading in money and securities, the crime of financing terrorism (Article 165a of the Criminal Code), an offence committed for financial or personal gain or a deliberate fiscal offence. Similar conditions are provided for partners handling the company’s affairs or authorized to represent the company, members of the company’s management bodies, real beneficiaries of an entity operating in the field of virtual currencies, as well as – persons managing activities related to conducting activities in the field of virtual currencies.

A person applying for entry into the register must have appropriate knowledge or experience in the field of virtual currency trading. This condition is considered to be met if the person concerned has completed a training course or a course covering legal or practical issues related to the activity in the field of virtual currencies or has performed activities related to such activity for at least one year. These circumstances, however, should be confirmed with the relevant documents.

Cryptocurrency Trading – How To Get In The Registry?

The register is kept by the minister competent for public finance. The application must contain the following elements:

• name and surname or name (company);
• number in the register of entrepreneurs in the National Court Register, if such a number has been assigned;
• NIP (tax identification number);
• indication of the virtual currency services provided;
• qualified electronic signature, trusted signature or personal signature of the applicant.
  In addition, the application must be accompanied by a statement that reads as follows:
  “I declare that the data contained in the application is complete and true. I am familiar with the conditions for conducting activities in the field of virtual currencies, referred to in the Act of March 1, 2018 on counteracting money laundering and financing of terrorism.”

The application for entry is submitted to the electronic inbox, using the online service provided at the electronic address indicated in the Public Information Bulletin of the competent Minister. This also applies to changes in the register, deletion from the register or suspension of this type of activity.
The Minister should make the entry within 14 days from the date of receipt of the application together with the declaration. Registration is refused in the form of a decision. The refusal may take place if the application is incomplete and has not been completed within the prescribed period or the data contained in the application is inconsistent with the facts.

Presumably, in order to facilitate registration, the Minister was obliged to make available on the Internet model applications for entry in the register of activities in the field of virtual currencies, change of entry and deletion from this register, and notifications about the suspension of activities.

Will the registry only be temporary?

The European Union is working on the adoption of the Crypto Assets Regulation (MiCA). This project contains much more stringent requirements for some entities that want to engage in activities in the field of virtual currency trading, including the obligation to obtain a permit or to publish the relevant information document, which is to be approved by the relevant national authorities. What is more, the requirements for cryptocurrency service providers are much more stringent, indicating, inter alia, prudential security requirements, organizational requirements, or stipulating conditions for the storage of crypto assets and clients’ funds. It may therefore turn out that the entry in the register will be only a temporary solution, and the entity currently entered in the register will not meet the conditions for activity in the field of cryptocurrencies after the adoption and entry into force of the MiCA Regulation.
Cryptocurrency market entities will be required to provide information on their environmental and climate footprint. The European Securities and Markets Authority (ESMA) will develop draft regulatory technical standards on the content, methodology and presentation of information related to major adverse environmental and climate impacts. Within two years, the European Commission will have to present a report on the environmental impact of crypto -assets and the introduction of mandatory minimum sustainability standards for the consensus mechanism, including proof-of- work.
In order to avoid the overlapping of the provisions of the MiCA regulation with the new anti-money laundering regulations, which will now also cover cryptocurrencies, MiCA does not duplicate the provisions contained in the amended provisions on money transfer agreed on June 29. However, the MiCA Regulation stipulates that the task of the European Banking Authority (EBA) will be to maintain a public register of non-compliant cryptocurrency service providers. Cryptocurrency service providers whose parent company is located in countries included in the EU list of third countries deemed to have high anti-money laundering risk as well as the EU list of non-cooperative jurisdictions will be required to implement strengthened controls in line with the EU anti-money laundering Framework. Stricter requirements may also apply to the shareholders and management bodies of crypto-asset service providers, in particular in relation to their location.
The tentative agreement stipulates that cryptocurrency service providers will need a licence to operate in the EU. National authorities will have to issue an authorization within three months. For major providers, national authorities will regularly provide relevant information to the European Securities and Markets Authority (ESMA).

Upcoming regulations in the cryptocurrency market

The European Parliament, after months of talks on this subject, announced the date of adoption of the MiCA (Markets in Crypto-Assets) package, which will introduce a number of rules for the functioning of the market in the European Union member states. MiCA is the world’s first such a complex solution that will regulate the digital currency market. In principle, the main task of the new law will be to protect market users against its high volatility and susceptibility to manipulation and speculation. One of the rules that will apply from the end of 2023 is the obligation for cryptocurrency exchanges to present capital security and customer protection rules.

AMLD6 directive

The newly introduced digital asset legislation described above and the controversial Regulation on Funds Transfer are only a small part of the larger package of EU anti-money laundering regulations. The EU – the European Council, the European Commission and the European Parliament – will create a new regulator for the cryptocurrency market. The EU is creating the sixth ‘Anti-Money Laundering Authority’ (AMLD6) which will have direct control of the cryptocurrency sector. The EU has recently taken a strict approach to cryptocurrencies. Recently, the European Parliament passed legislation that will increase the costs of operating exchanges and even make it impossible to make transactions between anonymous addresses and trading platforms. And even if the law prohibiting mining coins using the Proof-of- Work algorithm was rejected by the legislature, the European Central Bank continues to anticipate that such a ban will eventually be imposed – mainly because of environmental concerns. On the other hand, the AML directives of 2015 and 2018 described above define the requirements for the member states as regards the collection and sharing of specific data in the process of financial transactions. The timing of the implementation of the new rules will depend on how efficiently the debate in the European Parliament and the subsequent trialogues are concluded.

The new regulation, as it were, brings the bank transfer market into line with that of cryptocurrency transfers, requiring entities such as digital asset exchanges to collect their clients’ data along with their transaction history. Cryptocurrency market entities – mainly exchanges, exchange offices and custodians – will also be required to provide information to the relevant authorities when investigating money laundering and terrorist financing. Transactions from unhosted wallets – those that are not related to exchanges – will also be covered by the new regulation when an individual interacts with hosted wallets managed by exchange offices or exchanges. Transfers from an unhosted wallet to another unhosted wallet will not be covered by the regulations.