Draft law on Cryptocurrencies: Supervision, penalties and many changes
The Ministry of Finance’s Cryptocurrency law will, among other things, prohibit the offer of all virtual assets without a permit. The supervision of the market will be carried out by the Polish Financial Supervision Authority (KNF), which will have the power to impose severe penalties on companies or individuals that violate the cryptocurrency trading regulations. What will change in the cryptocurrency market?
What are cryptocurrencies?
Cryptocurrency is a specific type of virtual currency that stores information in fixed units. A virtual currency is a digital representation of value that is not a legal tender issued by the National Bank of Poland, foreign central banks, or other authorities, as electronic money, a bill of exchange, or a check. However, it is accepted as a medium of exchange, and as such, it can be stored, transferred, and traded electronically. The most popular and oldest cryptocurrency is Bitcoin (BTC).
Cryptocurrencies have already been legally recognized in some countries. In Poland however, the law has not been regulated trading in cryptocurrency until now. They can be legally purchased and used for payments, for example, in some online stores. Cryptocurrency trading also entails tax obligations.
New regulations on cryptocurrencies in Poland – Draft law on Cryptocurrencies
A lot will change in the cryptocurrency market once the Cryptocurrency Assets Bill comes into force. The draft law was published on February 23, 2024, on the Government Legislation Center website and is the result of the adoption of Regulation 2023/1114 on the markets in crypto-assets by the European Parliament and the Council (EU) on May 31, 2023, amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937 (OJ L 150, 09.06.2023, p. 40). The MiCA regulation has formally been applied from mid-2023 and regulates the use and proper functioning of the crypto-asset market within the European Union.
Cryptocurrency Law – key developments and changes.
Million-dollar penalties, permits, supervision by KNF and a public domain register
The Cryptocurrency Act is intended to help implement the tasks set out in Regulation 2023/1114, particularly in terms of effective supervision and investor protection by the Polish Financial Supervision Authority (KNF). As a result, high penalties of up to 10,000,000 PLN will be introduced. A controlled entity will be subject to an administrative fine of up to 20,000,000 PLN if it prevents or hinders the the initiation or implementation of KNF inspections. To fulfil its supervisory duties, the Commission will also be able to cooperate and exchange information with other authorities of the EU member states. Token issuers and cryptocurrency service providers will additionally be obliged to provide KNF with information about their activities.
The Polish Financial Supervision Authority (KNF) will oversee the entire market of assets related to cryptocurrencies and crypto-shares, such as in real estate or investments. After the regulations come into force, operating cryptocurrency exchanges and crypto-share exchanges will require a permit by KNF, the cost of shich is expected to be 4,500 EUR.
In addition, annual fees are anticipated to cover supervision costs. These will be 0.5% of the average revenue from crypto-asset services in the last three fiscal years preceding the year for which the fee is due, but not less than the equivalent of 750 EUR.
Asset-linked token issuers will be required to pay an annual fee of 750 EUR. The first year of activity will be exempt from the annual fee.
KNF will also have the power to block or confiscate domains where illegal operations are carried out. The maximum period for which a block can be established is 96 hours from the date specified in the request (order of the chairman of KNF) or six months from the day of the receipt of notification (request of the Public Prosecutor’s Office). The Public Prosecutor’s Office will also be able to suspend specific transactions related to crypto-asset trading.
A public register of internet domains and IP addresses will also be established. It will include companies operating in the field of crypto-assets without the required authorization as well as companies that otherwise violate MiCAR regulations. The register will be public, registration can be appealed.
Among other things, the new regulations will also extend the liability for the content of informational documents regarding cryptocurrencies to consulting firms and law firms. They will also provide the possibility of making declarations of intent in electronic form regarding services related to cryptocurrencies or their public offerings.
Changes in the cryptocurrency market – an overview of new regulations
In summary, the law on Cryptocurrency primarily provides for the following:
- Appointment of the Financial Supervision Authority (KNF) as the competent authority for the application of Regulation 2023/1114 and the introduction of tools for effective supervision by KNF. KNF will be empowered to carry out inspections in accordance with the provisions of the Capital Market Supervision Act of July 29, 2005.
- Establishing the obligations of issuers of crypto-linked tokens and e-money-linked tokens and crypto-asset service providers, including the obligation for issuers to submit information on their activities to KNF.
- Introducing the possibility for KNF to impose sanctions on providers, issuers, or applicants of cryptocurrencies, as well as introducing supervisory powers to KNF, including the possibility to impose fines on persons who professionally as intermediaries in transactions related to crypto-assets.
- Establishing the scope and principles of professional secrecy for information obtained in connection with the provision of cryptocurrency services – similar to that in the financial market, in particular in the case of banking secrecy.
Taxes and accounting for cryptocurrencies – support from a professional tax accounting firm
getsix® offers professional and comprehensive accounting services and tax consulting for cryptocurrency trading. We provide accounting services for legal entities and natural persons for the tax settlement of cryptocurrency trading. Our experts offer professional support in calculating income tax (PIT or CIT) on cryptocurrencies, accounting for transactions, and other operations related to cryptocurrencies. We will help you navigate the new regulations governing the cryptocurrency market after the law on crypto assets comes into force.
If you have any questions regarding this topic or if you are in need for any additional information – please do not hesitate to contact us:
CUSTOMER RELATIONSHIPS DEPARTMENT
ELŻBIETA NARON
Head of Customer Relationships
Department / Senior Manager
getsix® Group
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