December 2024 update on Polish Crypto Draft Act for MiCA enforcement

Two months ago, on October 11th of 2024, we commented on the initial Polish Draft Act for the enforcement of the MiCA Regulation in Poland.

In the beginning of December, additional changes were made by the Committee on European Affairs. This is not the final version of the text, as the Ministry of Finance and several other committees still have a say about it.

Though not numerous, a few of the proposed amendments raised serious questions on the side of crypto companies and lawyers. This article covers the two main changes to remember, their implications in case they would stay in the Act, and the way forward for the Polish crypto regulation.

Notable main changes

Our exploration of the amended Polish Draft Act showed some minor changes. Below are a few examples, just to raise awareness on the trend desired by the Committee on European Affairs.

Cases of misconduct (market manipulation, insider trading…) leading to a freeze of the crypto-assets now automatically trigger an administrative procedure from the KNF (the Polish financial regulator), while this was previously happening only on the basis of a decision. This provides the account holder who is subject to freeze with additional protections and guarantees, as stipulated in the Polish Code of Administrative Procedure.

Regarding secrecy, the disclosure of information from crypto assets services providers to the authorities are now mandatory in several more cases, following a more strict application of the European regulations.

Our attention was particularly caught by two major changes, that were also duly commented in the Polish public space by lawyers and specialists. These changes are:

• The ban on crypto loans and lending activities;
• A brusque switch to the European AML law.

Ban on crypto lending

Article 13 of the amended Polish Draft Act of December 2024 introduces that CASPs are expressly prohibited from making loans or assisting/brokering in any process involving loans or loan-like transactions, crypto lending services are therefore prohibited under the Act.

This short article is vague enough to imply a potentially very large implication. Any form of loan, even for a short period of time or a transitory part of a transaction, would therefore be forbidden.

Staking would be one of the activities impacted by this change. This aspect particularly raised concerns on making Poland a toxic ground for upcoming MiCA-compliant CASPs (crypto assets services providers). This ban would be specific to Poland and therefore may drive out both businesses and individuals out of the country.

Another example would be “buy now, pay later” services in crypto, which would become illegal to offer under the Polish crypto legal framework.

Switching the AML act

Another controversial change is the switch from the old AML (Anti-Money Laundering) regulations. The provision on administrative penalties for failure to comply with AML-CFT rules refers to the European regulation, expiring on December 30th of 2024. The updated regulation introduces the now famous Travel Rule.

Subsequently, and until the updated European regulation is enforced, this means that there will be no enforceable AML-CFT regulation applicable for CASPs in Poland, a regulatory hole.

Multiple concerns have been raised following this change, as it is deemed very unlikely that the Act is finalized by December 30.

The regulatory gap would apply to the whole financial sector, given that the provision referred to by the Polish Draft Act is the AML law of Poland itself, it could give freedom for any financial and banking institutions to commit financial crimes with no consequences whatsoever.

What does it means for VASPs and future CASPs

If the Act is enforced as is, these two changes will have noteworthy consequences. Commentators from both the crypto and the legal spheres are now warning against the effects of implementing the proposed amendments on crypto loans and a clumsy switch of regulation against financial crimes.

Though the amended Draft Act is by no means final, we foresee the potential effects, if it were to be enforced.

Crypto lending ban: vague scope and potential mass block

Banning crypto loans, potentially in all forms as the article 13 is short and vague, may mean a very harmful hit to the crypto industry in Poland. The most noteworthy consequence would be the de facto ban on staking services, where users are basically lending their crypto assets against staking interests to support and secure blockchains.

Legal commentators in Poland expressed multiple criticisms on this part of the amendment:

• Prohibiting lending in crypto assets may be contrary to the principle of freedom of contract of the Polish Civil Code;
• This ban not being part of the MiCA Regulation, and therefore only applicable in Poland, would drive out crypto asset services providers from Poland;
• Generally speaking, this would be a negative signal sent to entrepreneurs and investors considering Poland for business;
• Polish users of crypto assets services will then use foreign platforms and services providers.

This article is in no way definitive. The Polish Act still has some stages to go through, and we can hope that the strong arguments raised by lawyers and institutions in Poland will make a case for repealing the ban on loans.

AML regulation switch: opening a regulatory gap

The amendment of the Act changes the applicable AML law. The problem is: if the amended Act isn’t adopted before the end of the year (and the deadline of December 30), there will be a gap in regulation, opening a potentially critical loophole.

Basically, as the current effective EU regulation expires on December 30th, and as the proposed amendment sets the updated regulation (introducing inter alia the Travel Rule), parts of the applicable AML law in Poland will be non-operational between the expiration of the “old” regulation and the enforcement of the “new” one.

If any entity (not only crypto assets services providers) is fined on behalf of the Polish AML Act provision referring to the “old” regulation, they will be null. Nullum poena sine lege – no punishment without law.

The way forward for Poland

The major concerns raised by these two parts of the latest amendments have sparked arguments and criticisms from multiple actors of the legal and financial spheres. It is likely that this will trigger constructive discussions on the regulators’ side.

There are still stages to go through for the upcoming Polish Crypto Asset Act to enter into force and finalize the application of MiCA in the country.

What comes next until enforcement

As it stands, there are still a few committees who may opinionate on the Draft Act. The text, that may or not be amended by these committees, will then have to be voted on by the Polish Parliament, which can also interfere in the text. This means that the current version of the Polish Draft Act may be final, but there is no certainty about it.

We expect the Act to be finalized and enforced during the first quarter of 2025, though we do not exclude seeing it drag into the second quarter of the year. Our law team pays constant attention to the development of the enforcement of MiCA in Poland, where almost a hundred of our clients are currently registered as VASPs, with entities already undertaking preparations to become CASPs to comply with the new MiCA regime.

Be proactive before MiCA rules you out of business!

If you are already our clients, be reassured: the grandfathering period hasn’t been changed by these amendments. Stay in touch with your consultant to discuss the future implications of MiCA and potential alternatives, to stay on top of compliance and business efficiency.

If you are considering getting a crypto license in Poland, we encourage you to get in touch with our team in the shortest possible delays. Time is precious and flowing, the countdown to MiCA is ending.

No worries about being too late! Our legal team has more than one ace in its sleeve. Get in touch with us and learn about the alternatives to MiCA in Poland – for free.