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Digital currencies, known as cryptocurrencies, have seen a surge in popularity in recent years. The most well-known, Bitcoin, was introduced in 2009. Since its inception, Bitcoin’s value has skyrocketed from mere pennies to peaks around $120,000 (exceeding €100,000).
Originally conceived as an alternative to traditional, government-backed currencies and established financial infrastructures, cryptocurrencies have since entered the mainstream, capturing the attention of investors, financial institutions, and government bodies alike.
MiCA: Europe’s Regulatory Approach to Crypto
Within the European Union, the burgeoning cryptocurrency market is being shaped by the Markets in Crypto-Assets (MiCA) regulation. This directive mandates several key changes, including the segregation of customer cryptocurrency holdings from company assets by crypto exchanges. It also requires mandatory audits, industry registration fees, and the implementation of a “travel rule” system for verifying cryptocurrency transfer senders and recipients. Experts suggest that these measures are aligning cryptocurrencies closer to the established banking framework.
“MiCA emerged from a comprehensive five-year dialogue involving regulators, governments, and businesses. The resulting regulations are carefully considered,” explains Przemyslaw Kral, CEO of the cryptocurrency exchange Zondacrypto. He notes that recent cryptocurrency regulations enacted in the United States draw heavily from the MiCA Directive.
“This illustrates that European regulation can be beneficial when executed effectively. Our sector needs regulation, but it must be implemented sensibly and efficiently. We are currently pursuing MiCA-compliant licenses in Estonia and Cyprus. Unfortunately, this is not yet possible in Poland due to the absence of enacted legislation, with only a draft law under consideration,” he added.
The absence of a legal framework, coupled with the obstacles faced by cryptocurrency firms attempting to register operations in Poland, is a recurring concern voiced by industry stakeholders. The proposed Polish law is perceived as being even more stringent than the EU directive.
“The implementation of the MiCA regulation in Poland serves as a prime illustration of overregulation and ‘gold plating,’ exceeding the requirements of the directive. The proposed draft poses a risk of stifling innovative young Polish fintech businesses,” cautions Piotr Palutkiewicz, Vice President of the Warsaw Enterprise Institute, a think tank.
He argues that the Polish draft incorporates excessively high fees based on the value of the cryptocurrency issue, potentially rendering certain areas of the cryptocurrency business unprofitable.
“Companies intending to develop stablecoin issuance will likely cease operations in Poland, while others may relocate abroad, effectively providing services to Polish consumers via the grey market, operating outside Polish legal jurisdiction and oversight.”
“If fees are necessary, they should be tied to actual profits. The limited transition period is another cause for concern. The current timeframe of 4-9 months is inadequate for companies to adapt,” Palutkiewicz states.
Zondacrypto, a European cryptocurrency exchange with Polish roots and a presence in countries like Italy, Romania, and Bulgaria, exemplifies a company that has chosen to expand within another EU nation. While 80% of its 200 employees are Polish, and Poland remains its largest market, the company is officially registered in Estonia.
“In Estonia, we have been welcomed with open arms, while in Poland, we are facing considerable hurdles. Cryptocurrencies have the potential to become a significant Polish export, but the necessary political support is lacking. This stems from a lack of understanding and a reluctance to learn, as politicians prefer to perpetuate damaging stereotypes about the crypto industry. Regrettably, Polish regulators view cryptocurrencies as a threat rather than an opportunity,” Kral asserts.
“Meanwhile, Poland boasts a population receptive to cryptocurrencies and a wealth of talented specialists. The likely outcome is that these companies will relocate from Poland, operating under the jurisdiction of other regulators and contributing taxes to other nations,” he concludes.
Zondacrypto has already contributed over €6 million in VAT in Estonia. “I believe Poland is missing a significant development opportunity,” Kral emphasizes.
Is Europe Losing Ground in the Cryptocurrency Arena?
Kral observes that the cryptocurrency market is currently experiencing the most rapid growth in Asia, with the United States also demonstrating significant momentum. However, the industry is also steadily expanding in Europe.
The intention behind EU regulations was to create a unified European market. However, certain countries, such as Poland and Belgium, are delaying the implementation of the common law. Varying approaches to the European directive among different nations continue to create barriers within the unified European market.
“Having applied for MiCA licenses in Estonia and Cyprus, we are currently in a transition period, enabling us to operate as before. Some companies in Europe have already been granted licenses.”
“This predominantly pertains to entities registered in Malta, which has become something of a ‘McDonald’s of licenses’. Personally, I find it difficult to believe that the Maltese authorities are regulating this market precisely as required by the MiCA regulations. We have chosen a more challenging path because, for the long-term growth of our business, we prefer to engage with a more meticulous and stringent regulator from the outset,” Kral clarifies.
He concludes that, in the absence of enacted legislation, there is no indication of a Polish regulator in the foreseeable future.