In recent years, the cryptocurrency market has experienced tremendous growth, as evidenced by the legendary rise in the value of Bitcoin. Unfortunately, the increasing popularity of such payment methods has also led to a rise in frauds detrimental to investors, most often private individuals.
A natural consequence of these events has been the need to introduce regulations ensuring full supervision of the crypto asset market and protection of market participants.
At the EU level, this issue is comprehensively regulated by the Regulation of the European Parliament and the Council (EU) 2023/1114 of 31 May 2023 on the markets in crypto-assets, amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937.
Currently, work is underway on the Polish act on crypto-assets, which aims to align national regulations with Regulation 2023/1114. According to the draft law, its main assumption is the organization and execution of market supervision. The regulations will particularly relate to those offering public issuance of crypto-assets, persons seeking to admit crypto-assets to trading, issuers of asset-linked tokens, and e-money, as well as providers of crypto-asset services.
The Financial Supervision Authority (KNF) will play a crucial role in market oversight, designated as the institution responsible in our country for performing the functions and duties set out in Regulation 2023/1114.
The KNF will be authorized to perform control activities on supervised entities to determine whether their activities are conducted in accordance with the provisions of Regulation 2023/1114 and other legal acts.
As part of the supervisory measures, an important power of the KNF will include the ability to issue recommendations to token issuers to cease violations of obligations arising from the provisions of Regulation 2023/1114 or national law. Moreover, the KNF will also be authorized to impose on an offeror, an issuer of asset-linked tokens or e-money tokens, a person seeking admission to trading crypto-assets, or a provider of crypto-asset services operating a trading platform, the obligation to change the content or form of the informational document, its supplementation, as well as the change of marketing materials’ content.
In addition, issuers of asset-linked tokens, issuers of e-money tokens, and providers of crypto-asset services will provide the KNF with information about their financial situation and events that may affect their operations, as well as changes in the data contained in the application for a license to operate.
In case of violation or reasonable suspicion of violation of the provisions of Regulation 2023/1114, the KNF will be entitled to apply administrative sanctions, including a ban on distributing marketing materials, a ban on providing certain services in the field of crypto-assets for up to 12 months, and the imposition of a monetary penalty. The most far-reaching sanction against a supervised entity will be the revocation of the license to operate on the crypto-asset market.
Violation of the provisions may also result in criminal liability, as appropriate criminal provisions have also been included in the new regulations.
In designing these solutions, considerable attention has also been paid to issues related to professional secrecy. The obligation to maintain secrecy will relate to information concerning legally protected interests of entities on whose behalf services in the field of crypto-assets are provided. The planned solutions indicate a catalog of entities obligated to maintain secrecy and entities for which it is permissible to disclose information constituting professional secrecy and the circumstances in which this may occur. Breach of the secrecy obligation will result in liability for damages.
As can be seen, the planned regulations are extremely restrictive, but they will likely help eliminate dishonest or unreliable entities from the market. The Financial Supervision Authority, which has so far supervised the banking, insurance, and capital markets sectors, among others, may have a real impact on the stability and security of the crypto-asset market, including protecting the interests of market participants, especially individual investors.
Author: Adriana Kidawa, Legal Advisor, Partner, AKKG Gruszka Kidawa Law Firm.
