On February 23, 2024, a draft law on cryptocurrencies (hereinafter: “the Law”) was published on the website of the Government Legislation Center. The provisions of the proposed Law are aimed at ensuring the application of the provisions of Regulation 2023/1114 of May 31, 2023 on cryptocurrency markets (hereinafter: “MiCAR”), and primarily address the issue of supervision of the cryptocurrency market performed by the Financial Supervision Commission (hereinafter: “FSC”).
In addition to the principles of supervision, the proposed Law also regulates other important issues, such as professional secrecy of cryptocurrency service providers (hereinafter: “CASP”). The Draft Law also establishes the length of the transition period provided for virtual currency service providers (hereinafter: “VASP”), who after December 31, 2025, will be able to provide their services under the existing rules, without having to obtain a new license.
While most of the provisions of the proposed Law, as leading directly to ensuring the application of MiCAR regulations, do not cause much surprise or controversy, there were also unexpected proposals in the draft Law that came as a big surprise to market participants. These issues will certainly require deeper debate in the later stages of the legislative process.
Professional secrecy
The proposed Law sets out rules for the protection of professional secrecy, which will cover all information concerning the legally protected interests of entities to which cryptocurrency services are provided. The entities obliged to observe professional secrecy regarding cryptoasset services are to become members of the statutory bodies and employees of CASPs and CASP contractors. Among other things, the violation of professional secrecy is not to be caused by the transfer of information covered by secrecy to the competent public authorities or other entities, in cases exhaustively indicated in the Law. In this regard, professional secrecy regarding cryptocurrency services has been shaped in a manner similar to other types of professional secrecy applicable to the financial market, in particular payment secrecy.
Information obligations
The proposed Law details the rules of civil liability for information provided in a cryptocurrency information document. In particular, it is envisaged that liability for the content of the information document will not be borne solely by the offeror, applicants for admission to trading, operators of the trading platform or issuers, but also by the entities preparing or participating in the preparation of such a document. Such entities will have to be directly indicated in the prepared document, and their liability, together with the entities publishing information documents, will be joint and several. The regulation under discussion in practice will mean extending the responsibility for the content of information documents to various types of consulting firms or law firms.
Supervision of the cryptocurrency market
As previously announced, the drafters decided to grant the Financial Supervisory Commission (hereinafter: “FSC”) supervisory competencies with respect to entities operating in the cryptocurrency market. Specifically, the draft Act equips the FSC with the authority to conduct inspections, to which the provisions of the Act on Capital Market Supervision of July 29, 2005 will apply accordingly. Pursuant to Article 26 of the proposed Act, the controlled entity will be subject to an administrative penalty of PLN 20,000,000 if it prevents or hinders the commencement or conduct of an inspection by the FSC. The FSC, in order to carry out its supervisory duties, will also be able to cooperate and exchange information with other authorities of European Union member states.
Blocking of address, accounts and transactions
The proposed Law establishes rules for the blocking of distributed registry addresses and blocking of crypto-asset accounts, which will be able to be established in case of suspicion of a crime listed in Chapter 6 of the proposed Law. The maximum time for which the blockade will be able to be established will be 96 hours from the moment indicated in the request (in the case of the order of the Chairman of the FSC) or 6 months from the date of receipt of the notice (in the case of the order of the prosecutor). In addition to a full or partial blockade of an address or account, the prosecutor will also have the ability to order the suspension of a specific transaction related to crypto trading. Notwithstanding the above, it is worth noting that the explanatory memorandum to the proposed Law does not explain how the new provisions should affect the provisions for securing the execution of criminal judgments on property contained in the Law of June 6, 1997, the Code of Criminal Procedure.
Register of domains and IP addresses
A new and relatively controversial solution provided for in the proposed Law, and not explicitly mentioned in MiCAR, will be the creation of a registry of Internet domains and IP addresses. Such a registry is to include entities operating crypto-activities without the required authorization, as well as entities otherwise violating MiCAR regulations, provided there are no other effective measures leading to the cessation of the violation within a reasonable period of time. Entry in the said registry will entail the imposition of an obligation on a telecommunications company providing Internet access services to allow or restrict access to Internet interfaces using an Internet domain name or IP address entered in the registry free of charge, as well as to redirect calls referring to such a domain name or IP address to the relevant FSC website. The registry will be open to the public, and there will be a remedy for entry into it.
Costs of supervision of the cryptocurrency market
The proposed law introduces fees for supervision of the cryptocurrency market, including authorization fees and annual fees. Authorization of a public offering of ART or authorization of cryptocurrency services will entail payment of a relatively large fee, the equivalent of as much as €4,500. The amount of the annual fee to cover the costs of supervision in the case of CASPs will be determined on a pro-rata basis – it will be 0.5% of the average value of revenues from the provision of cryptoasset services over the last three fiscal years preceding the year for which the fee is due, but no less than the equivalent of 750 euros. Issuers of asset-linked tokens (hereinafter: “ART”), on the other hand, will be required to pay a fixed annual fee of 750 euros. The first year of CASP and ART issuers will be exempt from the annual fee.
Supervisory measures and administrative sanctions
One of the most important provisions of the draft law is the establishment of a series of supervisory measures and administrative penalties related to non-compliance with MiCAR or delegated acts. Supervisory measures related to the public offering and release of cryptocurrencies include, among others: recommending cessation of violations of obligations, imposing an obligation to change the content, form or addition of the information document, imposing an obligation to change the content of marketing materials, ordering the suspension or prohibition of the start of a public offering of cryptocurrencies. In the case of CASPs, on the other hand, supervisory measures include, among others: banning or stopping the provision of certain services, banning or stopping the marketing of designated cryptocurrencies, revoking the license. The maximum thresholds for fines set in the proposed Law are high, and their amount varies depending on the severity of the obligation violated and whether they can be imposed on individuals or institutional entities.
Transition period for VASP
The drafters proposed to shorten the transitional period provided for cryptocurrency service providers in Article 143(3) of MiCAR (the so-called gradfathering caluse) by 6 months, but did so only for entities enrolled in the VASP registry. This means that entities enrolled in the VASP registry no later than December 31, 2024 will be able to operate under the current rules until December 31, 2025. The VASP registry itself will thus be liquidated on January 1, 2026. It is also worth noting that the proposed Law expands the catalog of accidents that will cause the loss of registration in the registry. Such an accident will be, among other things, failure to respond twice to a request issued by the General Inspector of Financial Information pursuant to Article 76 of the Law on Anti-Money Laundering and Terrorist Financing of March 1, 2018. Loss of registration after January 31, 2024, on the other hand, will entail applying for a CASP license under MiCAR regulations.
Criminal provisions
The provisions of the draft law define not only a catalog of administrative, but also criminal sanctions imposed on entities operating in the cryptoasset market. Among the new types of prohibited acts are, for example, making a public offering of a cryptocurrency or applying for the admission of such a cryptocurrency to trading without filing or publishing an information document, providing inaccurate data or concealing true data in an information document, as well as conducting activities related to the provision of cryptocurrency services without authorization. However, there are many more new types of criminal acts.
When will the Law come into force?
The vast majority of the Law’s provisions will enter into force on June 30, 2024, with the proviso, however, that the provisions on the provision of cryptoasset services will be applied as of December 30, 2024 (the dates of entry into force of Title V of MiCAR on CASP). The consultation and agreement stage of the draft Law has now ended, with positions submitted by, among others: Financial Ombudsman, Financial Supervision Commission, National Bank of Poland, Union of Polish Banks, Stock Exchange, National Cooperative Savings and Loan Fund, Union of Financial Entrepreneurs in Poland. The draft law may change depending on comments made at the consultation stage or amendments within the parliamentary legislative process.
Who we are.
Raczynski, Skalski & Partners specializes in providing legal advice to the financial sector, including serving clients operating in the cryptocurrency market. Our lawyers prepare stakeholders for the commencement of Regulation 2023/1114 of May 31, 2023 on cryptoasset markets (MiCAR), including serving issuers, exchange offices and cryptoasset exchanges. The firm is experienced in handling business ventures related to various types of virtual assets and also advises clients on anti-money laundering and counter-terrorist financing obligations and compliance with reporting obligations to regulators.
Author: Kamil Prokopowicz, Associate
