A draft law introducing changes to foreign exchange regulations, presented during the work on implementing the EU MiCA regulation, could significantly impact the online currency exchange market in Poland. The proposed regulations aim to bring these businesses under full supervision of the Polish Financial Supervision Authority (KNF) by requiring them to obtain appropriate licenses or register with payment institution registries. Entrepreneurs who fail to comply within three months of the new regulations coming into effect will be forced to cease operations. The amendments also introduce strict penalties for violations, including fines of up to 5 million PLN or imprisonment for up to two years. The new rules are designed to organize the market, eliminate the so-called gray zone, and ensure greater transaction security for clients. However, they also pose significant costs for business owners, which could affect service prices or even lead to the collapse of many online currency exchanges, forecasts Daria Karwan, Legal Counsel and Head of the Legal Department at Mennica Skarbowa.
So far, online currency exchanges have operated partly in the gray zone. Unlike brick-and-mortar exchange offices, they were not required to register with the National Bank of Poland (NBP) or meet various obligations, such as maintaining proper records. The Ministry of Finance initiated the changes to the Foreign Exchange Law, filing a request in November for urgent regulation of online currency exchanges, citing a lack of supervision by the KNF, which, according to the Ministry, could expose clients to significant financial losses. The amendment introduces important changes, such as defining domestic and foreign cashless payment instruments and cashless currency exchange, detailed in Article 2, paragraphs 18a–c. It also clarifies that cashless currency exchange can only be conducted through payment accounts. Furthermore, it stipulates that businesses providing cashless currency exchange services must be payment service providers that hold payment accounts for their clients.
In practice, this means that online currency exchanges will need to obtain a national payment institution (KIP) license or register with the KNF as a small payment institution (MIP) to continue operating legally. Depending on the chosen option, the procedure is more or less formalized and time-consuming. Entities that fail to comply within three months of the law’s effective date will have to cease operations. This will allow the KNF to supervise entities that previously operated in the “gray zone.” The amendment also introduces changes to the Payment Services Act, including penalties stating that “conducting cashless currency exchange services in violation of foreign exchange law is subject to a fine of up to 5 million PLN, imprisonment for up to two years, or both penalties combined.” These sanctions aim to minimize the risk of violations and improve regulatory effectiveness, comments Daria Karwan.
The proposed changes will have a dual impact on online currency exchange clients. On the one hand, using services from regulated and KNF-supervised entities under the Payment Services Act will increase transaction security, preventing situations where exchanges fail to meet financial obligations. On the other hand, meeting the additional requirements could increase service costs, ultimately affecting clients’ wallets, as businesses will need to cover compliance costs, which could lead to higher exchange fees.
Banks, which also offer currency exchange services, stand to benefit. It is likely that some clients who previously used independent online exchanges will shift to these financial institutions. Some online currency exchanges that already meet regulatory requirements, possessing a MIP or KIP registration, will be prepared for the upcoming changes. Others may only now begin the process of compliance or cease operations entirely, adds Daria Karwan.
Many entrepreneurs believe the new regulations are too restrictive and could push smaller firms out of the market. There are also doubts about whether the new regulations will effectively prevent issues that have plagued the market (especially after controversies involving Cinkciarz.pl). The changes appear to be a response to current problems, but critics warn of the risk of excessively limiting competition in the online currency exchange market.
Source: https://managerplus.pl/nowelizacja-prawa-dewizowego-czy-czeka-nas-upadek-wielu-internetowych-kantorow-wymiany-walut-45699
