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CRYPTOCURRENCY TRADING PLATFORM – LEGAL STATUS AND REGULATIONS IN THE POLISH JURISDICTION

Definition of cryptocurrency in Polish regulatory law (DIGITAL VALUE IMAGE)

According to the key legal definition of the Polish Anti-Money Laundering and Terrorist Financing Act of March 1, 2018, a virtual currency in Polish regulatory law is understood as a digital representation of a value that is not:

a) legal tender issued by the National Bank of Poland, foreign central banks or other public administration bodies,

b) an international unit of account established by an international organization and accepted by individual countries belonging to this organization or cooperating with it,

c) electronic money within the meaning of the Polish Act of August 19, 2011 on payment services,

d) a financial instrument within the meaning of the Act of July 29, 2005 on Trading in Financial Instruments,

e) a bill or a check.

The above legal definition of virtual money in Poland, in addition to the so-called negative list (that is, an indication on the list of those securities that are not electronic money) also includes the second condition.
It is a digital representation of value that is exchangeable in business transactions for legal tender and accepted as a medium of exchange, as well as a digital representation of value that can be electronically stored or transferred or can be the subject of electronic commerce.

AML 6 Directive – the new European Supervisory Authority of the future (AMLA)

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Contracts for difference – legal status in Poland

Leverage contracts in Poland

Leverage is a tool by which an investor increases the chance of gaining profits in the short term, using foreign capital. The potential profits are sizable especially when compared to the capital outlay required for such an operation. The investor obtains external financing by which he reduces his own costs. The financing entity may be a bank granting the loan. The interest on the loan will be treated as an expense, which is an opportunity to reduce the tax burden on the income from the operation. Here it should be noted that, like any market activity, the use of leverage involves some risk. Failure will involve repayment of financing and, in the case of a bank, also high interest rates. In short, leverage is investing with borrowed money. Profits versus losses can be calculated in a simple way. The amount that the investor lays out of his own funds is at the same time collateral for the entire investment. It can be 100 or 1000 PLN; the financing entity determines the level of leverage – in Poland it is a maximum of 100:1. Using such a conversion rate, an investor who actually has PLN 100 can invest PLN 10,000. If the investment goes well, the costs that the investor will incur will be the return of the borrowed amount plus interest. The change in the instrument that was purchased by the investor is done not in relation to his equity, but to the total amount based on leverage. A change of 1% in the wrong direction in the example above will result in the loss of the security amount and the discontinuation of the investment. Larger changes will result in additional losses for the investor. It is possible to protect against such a situation with a broker who finances investments. Negative balance protection guarantees that after a loss in the amount of the invested own amount, the position will close automatically and the investor will not be left with a debit.

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Questions and answers regarding the Polish Register of Activities in the field of virtual currencies in Poland

ENTRY TO THE REGISTERWhat is the legal basis for the operation of the register of activities in the field of virtual currencies?

The register of virtual currency activities operates under:

The Act of March 1, 2018 on anti-money laundering and preventing financing of terrorism (Journal of Laws of 2021, item 1132, as amended),

The Act of March 6, 2018 – Entrepreneurs’ Law (Journal of Laws of 2021, item 162 as amended).

When will I be able to start doing virtual currency business?

You can start your virtual currency business after obtaining an entry in the Register of virtual currency activities, in accordance with the provision of Article 129m of the Law on Anti-Money Laundering and Countering the Financing of Terrorism:

Business activities involving the provision of services referred to in Article 2, paragraph 1, item 12, hereinafter referred to as “virtual currency business,” are considered regulated business within the meaning of the provisions of the Law of March 6, 2018 – Entrepreneurs’ Law and may be performed after obtaining an entry in the register of virtual currency activities.

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Cryptocurrency loan is not burdened with tax on civil law transactions – the view of the Polish Tax Authority

The loan agreement, the subject of which are cryptocurrencies classified as property rights, is not subject to tax on civil law transactions – as was confirmed by the director of the Polish National Tax Information.

The question was asked by the entity considering taking such a loan from an individual or entrepreneur. The enquiring entity explained that the subject of the contract will be a specific amount of cryptocurrency, and the return will be made after the time specified in it. The enquiring entity wanted to make sure that it would not have to pay tax on civil law transactions on such a loan.

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Crypto hedge funds – Polish and global trends

Most often, in economic terms, it is assumed that the hedge fund is an investment company. It manages a portfolio of securities available in public offerings, using leverage as well as derivatives. Hedge funds are among the riskiest investment funds.

Fund managers take long and short positions while investing in multiple financial instruments. A characteristic feature of a hedge fund is the independence of investment decisions from the general market situation. They generate profits regardless of whether there is a bull or bear market.

In other words, a hedge fund, thanks to its leverage and a variety of investment instruments, can make money even when the stock market declines. While other funds depreciate when declining.

The goal of hedge funds is to use unconventional methods of multiplying capital to reduce the risk of fluctuations in the value of the fund’s shares. Therefore, a hedge fund can earn income regardless of the market situation. The investor must also take into account that the fees charged by the hedge fund managers are calculated on the basis of the profit generated by the fund.

Hedge Fund: Principles of Operation

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