Polish crypto regulator comments on MiCA enforcement timeline

On August 9th of 2024, the Polish Government Legislation Center published the Polish Draft Act (PDA), a proposal draft tackling the enforcement of the Markets in Crypto Assets (MiCA) regulation in Poland. The PDA first and foremost names the Komisja Nadzoru Finansowego (KNF) as the responsible authority for cryptocurrency business regulation in Poland, within the scope of the MiCA regulation.

This is not a final text, as it will undergo additional scrutiny in the legislative process. Nonetheless, the PDA sets the stage for further advancements on the transition from the current crypto license in Poland to the enforcement of the MiCA regulation and of the Crypto Assets Service Provider (CASP) status to crypto businesses.

If you are currently operating under a registration as virtual asset service provider (VASP) in Poland, read carefully.

Comments from the Polish regulator

We shall look into the PDA to understand the vision and to acknowledge the provisional decisions taken during the Polish legislative process for crypto-assets services providers and for emittors of crypto-assets under the new MiCA regulation.

Entry into force and transitional period

The main information emanating from this draft act, is the permission to operate for Polish VASPs until June 30th of 2025. As the MiCA regulation for crypto-asset service providers (CASP) will enter into force in December of 2024, this means a grandfathering-period of six months for crypto businesses established in Poland. However, it is heard that operating VASP should either apply for the CASP status (as per the MiCA regulation) or withdraw their license before May 1st of 2025.

It is also heard that the Polish regulatory authorities have the power to cancel a license during the transitional period. This means that the tolerance for previously registered VASPs is implicitly held for companies who have the shoulders and will to comply with the MiCA requirements.

Licensing fees

The PDA disclosed that the application to register a company as a CASP in Poland shall be accompanied by a fee of up to 4.500 EUR. Note: emitters of Asset-Referenced Tokens (ART) are subject to the same fee.

CASPs with a license registered in another EU member state must report their activities in Poland, registration involves a fee of up to EUR 4.500, but if the home member state of the CASP does not charge any registration fee, the fee is waived.

An annual fee will apply from the second year for CASPs and emitters of ARTs alike. This fee shall be calculated between a minimum of 500 EUR (in PLN equivalent) and:

• for CASPs: up to 0,5% of the average revenue from the provision of crypto-assets services in the past three years (based on the first year, for the first settlement of the annual fee);
• for emitters of ARTs: up to 0,5% of the product of the arithmetic average of the sums of financial liabilities for the issued tokens (determined as of January 1st of the calendar year).

Finally, as MiCA introduces the obligation to produce a whitepaper in order to issue a crypto-asset, the KNF requires to check and approve the whitepaper beforehand, for a fee of up to 1.000 EUR.

Whitepaper requirement

As stated above, MiCA introduces the formal obligation for emitters of any crypto-asset entering the Regulations to produce and submit a whitepaper.

The new regulations extend liability pertaining to the whitepapers up to the audit and law firms that may prepare them on behalf of crypto-asset emitters. This means that a law firm such as LegalBison may be liable if one of our client’s whitepaper is deemed wrong by the KNF.

The KNF also specified the sanctions in case of a misleading (“false information or concealing true information“) whitepaper, relating to ARTs and EMTs:

• a fine of up to 1.000.000 PLN (ART) / 5.000.000 PLN (EMT);
• a jailing sentence of up to 2 years (ART) / 5 years (EMT).

About the KNF

The Komisja Nadzoru Finansowego (KNF) is the Polish Financial Authority that has been designated as the competent authority for the enforcement and application of MiCA.

The PDA provides the KNF with a set of powers to comply with the expectations of the European Securities and Markets Authority, as they formulated the MiCA regulation.

Public register and power to block internet websites

The KNF will publish and maintain a public register of the internet websites and IP addresses of companies operating in the field of crypto-assets. This register will also include a list of unlawful participants. The KNF has the right and power to block or confiscate domains, where unregistered or illegal activities are conducted.

Freeze of crypto assets

If the KNF suspects market manipulation, insider trading or other such breaches of the law, it can request a crypto-assets service provider to freeze an account for 96 hours and for up to 6 months. The owner of the frozen account has then 30 days to appeal the decision to an administrative court.

Importantly, carrying the freeze may not engage the disciplinary, civil and criminal liability of the service provider or of the persons acting on its behalf.

Fines

As the competent authority in Poland, the KNF can impose fines for breaches of the PDA and of the MiCA regulations to entities operating in the field of crypto-assets:

• A fine of up to (approximately) 4,5 M € for not complying with the authorities or hindering the process of investigation;
• A fine of up to (approximately) 5 M € or 3% of the total revenue for CASPs (12,5% of the total revenue for ARTs and EMTs) for regulatory breach;
• A fine of up to 15 M € if a crypto-asset trading platform violates the AML-CFT obligations imposed by the law.

Note: the PDA states that the maximum possible fine is set to 15 million € for violating the PDA or the MiCA regulation.

Crypto-entrepreneurs and VASPs: time is in your favor, but don’t waste it

We’re getting close to the full enforcement of the MiCA regulation for crypto-asset services providers. At LegalBison, we received countless questions about possible grandfather rights of Polish VASP companies: how long will they be allowed to operate in their present form, once MiCA is in full force in 2025.

The answer has now been given by the Polish officials: until June 30th of 2025, for existing VASPs. It is important to note that this timeframe can be shortened if the KNF deems necessary to revoke a VASP authorization before this deadline. Also important to note is that, from May 1st of 2025 to June 30th, the grandfather right only applies to companies having applied for a MiCA license as a CASP.