Cryptocurrency Regulation in Poland

With the growing popularity of virtual currencies, the physical signs of which are Bitcoin ATMs, Poland has become a jurisdiction where cryptocurrency businesses – mining, sales, and purchase of crypto assets – are regulated and supervised by the national authorities.

The Polish financial market is generally supervised by the Polish Financial Supervision Authority which is responsible for ensuring effective functioning and development of the market as well as participates in the preparations of the draft legal acts created for the purpose of the financial market supervision.

Cryptocurrency businesses are now a separately regulated area, administered by the Tax Administration Chamber who keeps a register of crypto activities, titled the Register of Virtual Currencies.

Crypto companies operating in Poland are supported by the following initiatives:

• The Blockchain and New Technologies Chamber of Commerce representing the interests of the industry under the applicable Polish law
• The Innovation Hub where the supervisory authority consults the Fintech companies as well as provides virtual sandboxes to support the development of new Fintech startups

Anti-Money Laundering and Counter-Terrorist Financing Law

The main legal act combating money laundering and terrorist financing in the Polish crytpcurrency and other financial markets is the Act of March 1, 2018 on Counteracting Money Laundering and Financing of Terrorism, also known as the Polish AML Act

. It’s one of the first pieces of Polish legislation defining the AML-specific term of “virtual currencies” and their regulation in the country. It stipulates fundamental AML principles for virtual currency institutions carrying out the following activities:

• Virtual currencies exchange
• Exchange of virtual currencies for fiat money
• Cryptocurrency brokerage
• Account provision and maintenance services for virtual currencies (crypto wallets)

The General Inspector of Financial Information is at the forefront of the Polish anti-money laundering and counter-terrorist financing system. The aim is to increase transparency and impose protection from suspicious transactions.

The tasks of the institution include the following:

• Enforcing compliance with the Polish AML Act
• Requesting information about transactions from the financial institutions
• Analysing information about the financial market actors that might be linked to money laundering or terrorist financing
• Suspending transactions and blocking accounts
• Cooperating with national authorities as well as foreign institutions which they’re also authorised to share information with
• Assessing and reporting on the national risks pertaining to money laundering and terrorist financing
• Creating strategies to combat money laundering and terrorist financing
• Imposing administrative penalties
• Communicating information about their area of work through the public channels

Virtual currency companies are obligated to implement the following procedures:

• Transparent designation of the company’s management responsible for carrying out responsibilities laid out in the Polish AML Act
• Implementation of internal AML processes designed for combating money laundering and terrorist financing
• Integration of KYC processes created for customer identification and verification as well as for assessing potential client-related risks
• Reporting to the General Inspector of Financial Information
• Designing and running training programmes for the company’s staff responsible for executing AML procedures

Competition and Consumer Protection

Under Polish law, specific rules for cryptocurrency consumer protection haven’t been established yet. However, the Consumer Rights Act of 30 May 2014 regulates economic activities of businesses that conclude contracts with consumers regardless of the means of transactions, which makes it applicable to the virtual currencies. Like all market participants, cryptocurrency-using businesses must comply with the Consumer Rights Act when concluding a contract with consumers, the example of which is respecting the right to withdraw from the contract in the cases stipulated in the Consumer Rights Act.

As long as virtual currencies don’t qualify as e-money, which is considered a payment service, their circulation isn’t subject to the Payment Services Act.

In Poland, there is no specific competition regulation for cryptocurrencies, although the provisions of the Act on the Protection of Competition and Consumers of 16 February 2007 generally apply. It tackles the following tasks:

• Regulation of promoting and protecting competition
• Protecting the interests of entrepreneurs and consumers in the public interest
• Preventing anticompetitive practices
• Preventing practices that infringe collective consumer interests
• Preventing the application of wrongful provisions of model forms of contracts
• Preventing anticompetitive concentrations and combination of entrepreneurs

Advantages

New Crypto Regulations in the EU

Cryptocurrency regulation is advancing in the EU which Poland is part of. Therefore, in addition to the Polish law, it’s imperative to monitor the quickly evolving European legal framework that’s being constructed to regulate cryptocurrency businesses operating in or from the EU.

For instance, the European Commision is currently working on new KYC requirements for crypto businesses which will restrict virtual currencies businesses from transacting with unhosted wallets without verifying their owners’ identities beforehand. The Commission has proposed removing the current threshold of 1,000 EUR which means in the near future all crypto transfers will be subject to KYC procedures.

The Register of Virtual Currencies

A company planning to engage in cryptocurrency-related economic activities in Poland is legally required to register with the Register of Virtual Currencies, maintained by the Tax Administration Chamber.

Companies engaging in the following activities are obligated to get into the Register:

• Exchange of virtual currencies for fiat money
• Exchange of virtual currencies one for another
• Provision and maintenance of accounts for virtual currencies (wallets)
• Intermediation for the exchange of virtual currencies (brokerage)

These activities also determine the type of license a virtual currencies company should apply for. A company is permitted to obtain either one or all the applicable licences.

The Register is part of amended KYC procedures. Any company that fails to register prior to the launch of their crypto activities, may be fined the sum of 100,000 PLN (approx. 21,646 EUR). Before going through the mandatory crypto-authorisation procedure, crypto businesses must make sure that they comply with particular legal requirements.

Requirements for the Virtual Currencies Company

The process of establishing a company for a cryptocurrency business in Poland is identical to the process of establishing a company for any other business. The most popular type of crypto company in Poland is a Limited Liability Company (Sp z.o.o) which can be established by one or more shareholders who are all allowed to be foreign non-residents of Poland and who aren’t required to hire a local director. Depending on the provision of required documentation and institutional procedures, it may take several weeks to open a new company in Poland.

Key steps of opening a new Limited Liability Company in Poland:

• Having a unique company name prepared for the registry
• Drawing up a power of attorney in case of remote registration
• Getting a notarised photocopy of the passport of the director/founder of the company with an apostille attached to it
• Preparing the Deed of Formation (the founding documents for an Limited Liability Company must be prepared and signed in front of a Polish notary)
• Registering local office premises is a prerequisite (the lease agreement will suffice to prove it), a virtual office might be an option too
• Opening a corporate bank account in Poland
• Transferring the authorised capital to the new account, the minimum of which is 5,000 PLN (approx. 1,084 EUR), which is subject to a 0,5% Civil Transaction Tax
• Obtaining a REGON (statistical) number
• Obtaining a NIP (tax identification) number
• Applying for a VAT number
• Submitting an application to register the company with the National Court Register (KRS); it will require such information as REGON number, NIP number and the application for the company’s registration with the Social Insurance Institution (the registration fee – 500 PLN (approx. 108 EUR), the consideration may take up to 7 days)
• Appointing a Management Board of the company

Moreover, prior to registering with the Register of Virtual Currencies it’s imperative to demonstrate that the crypto company has designed a transparent and reliable framework of operations.

Requirements specific to a virtual currencies company:

• A business plan must include documentation about hardware and software used for crypto business operations
• Internal processes for meeting AML/KYC standards and ensuring risk control must be established
• Hiring an AML officer who has to be neither a Polish citizen nor a resident of Poland; having relevant professional experience is a prerequisite

It’s important to note that all of these documents must be submitted in Polish which means that non-Polish speakers and non-Polish document owners will need the services of a sworn translator.

Many obligations related to running a company in Poland can be performed online. If the company directors are foreign citizens without a Polish personal identification number PESEL, they can request it in case they wish to obtain a Trusted Profile allowing electronic signing of applications which will enable them to make use of online services for businesses.

Company directors and founders must meet the following requirements:

No criminal records – the law enforcement authorities should issue a certificate proving that the directors and founders were never convicted of criminal or tax offence against public institutions and local government, the administration of justice, the credibility of documents, property, economic turnover and property interests in civil law transactions, money and securities trading, or any offence committed for material or personal gain or an intentional fiscal offence.

Proven professional and/or academic financial experience – the directors and founders must demonstrate that they have at least 1 year of experience in the virtual currencies business; if this condition can’t be met, they have to attend a course covering legal and practical issues related to virtual currencies businesses.

Registration Process for the Register of Virtual Currencies

Prior to starting to operate in Poland, every crypto company must go through the crypto-authorisation procedure for registering with the Register of Virtual Currencies.

Applications may only be submitted electronically via the Electronic Platform of Public Administration Services (ePUAP). It must be consistent with the facts and contain all the required documentation. If all the conditions are met, the Tax Administration Chamber will enter the company into the Register of Virtual Currencies within 14 days from the date of receipt of the application. In case of errors, it’s permitted to apply for the correction of the application but it may delay the process of consideration.

The Polish regulator hasn’t confirmed any periodic fees for the supervision of virtual currencies companies in Poland.

The main stages of the application process:

• Acceptance of the application for entry into the Register
• Verification of the application
• Entry into the Register or issuance of a decision refusing to make an entry into the Register

Key steps of the applicant journey:

1. Preparing a declaration of compliance with the conditions required by law to conduct activities in the field of virtual currencies
2. Preparing a declaration of no criminal record
3. Filling out the ePUAP application form
4. Paying the stamp duty in the amount of 616 PLN (approx. 133 EUR) at the time of submitting the application (the payment confirmation must be attached to the application form)
   • Payments are made to the bank account of the Katowice City Hall: PKO BP SA no. 52 1020 2313 2672 0211 1111 1111 (with an annotation “fee for entry in the register of activities in the field of virtual currencies”)
5. An applicant can opt to request a virtual certificate of an entry into the Register of Virtual Currencies which can be issued within 7 days from the date of obtaining the entry. However, it must be paid for at the time of submitting the application; the stamp duty is 17 PLN (approx. 4 EUR).

It’s not possible to appeal the decision to refuse to make an entry into the Register of Virtual Currencies, but it’s allowed to submit a new application for reconsideration. The application is submitted to the Director of the Tax Administration Chamber in Katowice either electronically via the ePUAP platform or by sending it by post to the following address: ul. Paderewskiego 32b, 40-282 Katowice.

Reporting Requirements

All types of companies established in Poland are obligated to comply with the annual reporting and auditing requirements. Annual financial statements and annual income tax declarations must be submitted to the e-Tax Office. Moreover, cryptocurrency companies are obligated to submit AML reports to the General Inspector of Financial Information. VAT reporting is submitted either monthly or quarterly.

A certified audit, on the other hand, is required only if a Limited Liability Company meets at least two of the following conditions: annual net revenue exceeds 5 mill. EUR, annual turnover exceeds 2,5 mill. EUR, annual employment is 50 or more full-time employees.

Crypto regulation in Poland

Taxation of Virtual Currencies Companies

There is no crypto-specific tax, however cryptocurrency companies operating in Poland, depending on their legal structure, are subject to paying a variety of already existing taxes which in certain cases might be spared, considering that Poland has agreements on the avoidance of double taxation with more than 80 countries.

The most common taxes applicable to a Limited Liability Company in Poland include Corporate Income Tax, Personal Income Tax, VAT, Stamp Duty, Real Estate Tax and Excise Duty. Also, just like any other employer, a virtual currencies company, if employing individuals, is obligated to pay Social Insurance and Health Insurance contributions to the Polish government.

Standard tax rates in Poland:

• Corporate Income Tax – 19% (if annual revenue doesn’t exceed 2 mill. EUR, a 9% rate applies)
• Personal Income Tax – 17%-32% depending on the taxable income band
• VAT – 23%
• Dividends withholding tax – 19%

When it comes to paying Corporate Income Tax in Poland, the following aspects are worth noting:

• Revenues from the exchange of virtual currency for legal tender, goods, services or property rights other than the virtual currency, or from the payment of other liabilities with the virtual currency, shall be considered revenues from capital gains.
• The value of virtual currency obtained in exchange for other virtual currency isn’t considered as revenue.
• As in the case of revenues, expenses incurred in relation to the exchange of virtual currency for another virtual currency will not be considered as revenue earning costs.
• Income from the transfer of virtual currencies is the difference gained in a given tax year between the total revenues earned from the transfer of virtual currencies against consideration and the revenue earning costs.
• To avail of the preferential tax rate or tax exemption under a relevant double tax agreement, the location of the taxpayer’s seat for tax purposes must be documented by a certificate of residence obtained from the taxpayer.
• At the end of the tax year which coincides with the calendar year, the taxpayer must indicate in the tax statement the income earned in that tax year from the transfer of virtual currencies and calculate the income tax due.

Key aspect to note when registering as a VAT taxpayer:

• According to EU law, the provision of services involving the exchange of cryptocurrencies into traditional currencies and the exchange of traditional currencies into cryptocurrencies is VAT exempt.
• Other products and services are subject to VAT

Suspending Virtual Currencies Activities

In the case of suspension of activities in the field of virtual currencies, a company can apply for the removal from the Register Virtual Currencies. The application isn’t subject to stamp duty. Information about the deletion from Register Virtual Currencies will be visible in the Register within 14 days from the date when the decision in this matter becomes final.

It’s mandatory to report on the suspension of virtual currency activities. The notification of suspension of activities in the field of virtual currencies must be made by submitting an electronic form via ePuap. It should be submitted within 14 days from the date of suspension of the activity. In the notification a company should indicate the date of the suspension of activities, which may not be earlier than the date of entry into the registry and cannot be a date from the future.

The authorities responsible for the maintenance of the Register Virtual Currencies can remove a company from the Register on the following occasions:

• After obtaining information on the removal of the company from the Central Register and Information on Economic Activity or from the National Court Register
• If a company fails to meet the conditions required by law to perform virtual currencies activities
• If a company becomes incompatible with the actual state of affairs

Crypto Regulation in Poland 2023

In spite of the popularity of cryptocurrencies and consequent regulatory issues, Poland remains a relatively relaxed jurisdiction for cryptocurrency businesses as crypto-specific regulatory developments are slowly emerging at the national level, mostly due to the EU regulatory framework that applies across the member states.

New EU Rules Applicable to Poland

The EU continues to advance crypto regulations by tightening and clarifying the rules that apply to Crypto Asset Service Providers (CASPs), including companies and individuals operating from Poland. In 2022, the Economic and Monetary Affairs Committee approved the Markets in Crypto-Assets (MiCA) regulation for a vote by the European Parliament and the EU members. MiCA’s regulatory framework for the prevention of market abuse prohibits and deals with market manipulation, illegal disclosure of insider knowledge, and insider trading.

The measures include the improved definition of inside information in relation to CASP activities, and surveillance and enforcement mechanisms. MiCA is designed not only to provide legal certainty, prevent market abuse and this way ensure stability but also to encourage the development and adaptation of crypto-related products and services. Currently, MiCA excludes decentralised finance (DeFi) and non-fungible tokens (NFTs).

One of the key changes is related to environmental responsibilities. When new laws come into effect, significant CASPs will be obligated to publish the amounts of their energy consumption on their business websites and share the data with national authorities. When it comes to more elaborate procedures, the European Securities and Markets Authority (ESMA) will shortly introduce regulatory technical standards. The aim of this rule is to contribute to the reduction of the high carbon footprint of cryptocurrencies.

The anti-money laundering rules are laid out in anti-money laundering and counter-terrorist financing (AML/CFT) directives which MiCA shouldn’t overlap. That said, the European Banking Authority (EBA) will be authorised to maintain a public register and conduct enhanced AML/CFT checks of non-compliant CASPs. A non-compliant CASP is a crypto business whose parent company is registered in countries that are classified by the EU either as third countries, considered high-risk for anti-money laundering activities, or non-cooperative jurisdictions for tax purposes.

As for the supervision of stablecoins, this task will be assigned to the European Banking Authority (EBA). Issuers of stablecoins who operate within the EU will be obligated to build up a sufficient liquid reserve, with a 1:1 ratio, partly in the form of deposits. This will enable all stablecoin holders to be offered a claim by the issuer at any time and free of charge. MiCA’s regulations are expected to come fully into force before the end of 2024 and they will apply directly to Polish crypto businesses.

Regulatory Sandbox and Support

In 2022, the EU agreed on the final regulation for the pilot regime for DLT-based market infrastructures. It provides a legal framework for the trading and settlement of transactions in cryptoassets that under Markets in Financial Instruments Directive 2 (MiFID 2) qualify as financial instruments. Similar to a sandbox approach, the pilot facilitates safe experimentation with new technologies and serves as a means to gather evidence for a potential subsequent permanent framework.

The pilot is planned to be launched in March 2023 and it should be reviewed in 2026. Meanwhile, the European Securities and Markets Authority (ESMA) continues to consult on draft guidelines with the aim to establish standard formats and templates for application to the DLT and is now engaged in Q&As to assist with implementation.

In 2023, Polish crypto companies are supported by the following national initiatives:

• KNF’s Innovation Hub – the supervisory authority supports the development of new technologies by consulting Fintech companies and providing virtual sandboxes
• The Blockchain and New Technologies Chamber of Commerce which represents the interests of the industry under the applicable Polish legislation

Cryptocurrency Licence in Poland in 2023

Poland hasn’t still introduced a robust crypto licensing process with licensing and supervision fees, and the Tax Administration Chamber continues to issue Polish crypto authorisation which is an equivalent of a cryptocurrency licence. If you’re planning to offer crypto products or services in Poland and are in need of a crypto licence, you’ll first have to be included in the Register of Virtual Currencies which is part of AML/KYC procedures.

An authorised Polish crypto business can provide the following services:

• Exchange of fiat currencies and cryptocurrencies
• Exchange of different cryptocurrencies
• Crypto exchange brokerage
• Provision and maintenance of cryptocurrency wallets

Applications for crypto authorisation can be submitted online via the Electronic Platform of Public Administration Services (ePUAP). It’s important to note that they must contain consistent factual information and be accompanied by all the required documentation. That said, any errors can be corrected, although that normally causes delays in the application process. If there is no reason to reject an applicant, the authorisation is granted within 14 days from the date of receipt of the application.