MiCA in Poland – Capital requirements
One of the key requirements for obtaining a crypto license (CASP license) in Poland under MiCA is meeting capital requirements. Crypto Asset Service Providers must adhere to certain prudential requirements. These standards are set either as a fixed amount or as a proportion to the fixed overheads of crypto-asset service providers of the preceding year.
Capital requirements amounts
First of all, it has to be noted that capital requirement of VASP (CASP) in Poland is not fixed value. According to Article 67 of MiCA , Crypto Asset Service Providers in Poland must at all times maintain prudential safeguards equal to at least the higher of the following amounts:
- a) the amount of the fixed minimum capital requirements specified in Annex IV, depending on the scope of crypto services;
- b) one quarter of the fixed overheads from the previous year, subject to an annual review.
As consequence, the minimum capital requirement of Polish CASP is as follows:
1. Class 1 – EUR 50.000
Crypto-asset service provider authorized to offer the following crypto-asset services:
- Execution of orders on behalf of clients;
- Placement of crypto-assets;
- Provision of transfer services for crypto-assets on behalf of clients;
- Reception and transmission of orders related to crypto-assets on behalf of clients;
- Crypto-asset advisory services; or
- Crypto-asset portfolio management.
Class 2 – EUR 125.000
Crypto-asset service provider authorized to offer any services included under Class 1, as well as the following services:
- Provision of custody and administration of crypto-assets on behalf of clients;
- Exchange of crypto-assets for fiat currency; or
- Exchange of crypto-assets for other crypto-assets.
Class 3 – EUR 150.000
Crypto-asset service provider authorized to offer any services included under Class 2, as well as the following service:
- Operation of a crypto-asset trading platform.
However, above capital requirements has to be understand as only first level of minimum capital requirement. Second level is the amount of one quarter of the fixed overheads of the preceding year, reviewed annually. This amount may be higher than presented above classes of minimum capital amounts. According to Article 67 of MiCA CASPs calculate their fixed overheads for the preceding year, using figures resulting from the applicable accounting framework, by subtracting the following items from the total expenses after distribution of profits to shareholders or members in their most recently audited annual financial statements or, where audited statements are not available, in annual financial statements validated by national supervisors:
- staff bonuses and other remuneration, to the extent that those bonuses and that remuneration depend on a net profit of the crypto-asset service providers in the relevant year;
- employees’, directors’ and partners’ shares in profits;
- other appropriations of profits and other variable remuneration, to the extent that they are fully discretionary;
- non-recurring expenses from non-ordinary activities.
What about those Crypto Assets Service Providers which did not conduct business activity yet? Those CASPs in Poland shall use the projected fixed overheads included in their projections for the first 12 months of service provision.
Form of complying with capital requirements
The capital safeguards shall take any of the following two forms or a combination thereof:
- own funds;
- an insurance policy covering the territories of the Union where crypto-asset services are provided or a comparable guarantee
In practice, complying with capital requirements has to have form of own funds of CASP. It is unlikely that any insurer will offer a policy that provides such an option.
How to understand own funds of Polish CASP as form of minimum capital? In particular, do crypto assets may calculate to the amount of capital requirements?
According to MiCA, own funds are funds consisting of Common Equity Tier 1 items and instruments referred to in Articles 26 to 30 of Regulation (EU) No 575/2013 after the deductions in full, pursuant to Article 36 of that Regulation, without the application of threshold exemptions pursuant to Articles 46 and 48 of that Regulation.
Definition is complex and requires further interpretation. Currently, our Law Firm in Poland recommends this provision to be interpreted as the requirement to hold specific amount of fiat money in the IBAN.
It should be noted, that according to Article 62 point 2 letter e of MiCA, the application to obtain crypto license shall contain, among others, proof that the applicant crypto-asset service provider meets the requirements for prudential safeguards.
Minimum capital requirement amount may be hold in either EUR or PLN currency. The equivalent in Polish złoty of the amount expressed in euro. According to Article 10 of draft of Polish Act on Crypto-Assets Market, the equivalent in Polish złoty of the amount expressed in euro shall be calculated according to the average euro exchange rate announced by the National Bank of Poland on the day preceding the date of submission of the application for obtaining CASP license.
ESMA guidance on MiCA prudential requirements of CASPs
As it was indicated in my article about CASPs internal documentation, the MiCA regulation mandates that the European Securities and Markets Authority (ESMA), in close collaboration with the European Banking Authority (EBA), create a range of Regulatory Technical Standards (RTS), Implementing Technical Standards (ITS), and Guidelines. The RTS developed by ESMA outline the necessary information that must be included in an application for authorization as a crypto-asset service provider. The Draft RTS pursuant to Article 62(5) of MiCA is also available for download here.
The ESMA’s RTS includes also guidance regarding prudential requirements of CASP in Poland. According to Article 3 of the RTS, An applicant seeking authorisation as a crypto-asset service provider shall provide to the competent authority all of the following information:
- a description of the applicant’s prudential safeguards in accordance with Article 67 of Regulation (EU) 2023/1114, consisting of:
- the amount of the prudential safeguards that the applicant has in place at the time of the application for authorisation and the description of the assumptions used for its determination;
- the amount of the prudential safeguards covered by own funds referred to in Article 67(4), point (a), of Regulation (EU) 2023/1114, where applicable;
- the amount of the applicant’s prudential safeguards covered by an insurance policy referred to in Article 67(4), point (b), of Regulation (EU) 2023/1114, where applicable;
- forecast calculations and plans to determine own funds, including:
- forecast calculation of the applicant’s prudential safeguards for the first three business years;
- planning assumptions including stress scenarios for the above forecast as well as explanations of the figures;
- expected number and type of clients, volume of orders and transactions and expected maximum amount of crypto-assets under custody;
- for companies that are already active, the financial statements of the last three years approved, where audited, by the external auditor;
- a description of the applicant’s prudential safeguards planning and monitoring policies and procedures;
- proof that the applicant meets the prudential safeguards in accordance with Article 67 of Regulation (EU) 2023/1114, including:
- in relation to own funds:
- documentation on how the applicant has calculated the amount in accordance with Article 67 of Regulation (EU) 2023/1114;
- for companies that are already active and whose financial statements are not audited, a certification by the national supervisor of the amount of own funds of the applicant;
- for undertakings in the process of being incorporated, a statement issued by a bank certifying that the funds are deposited in the applicant’s bank account;
- in relation to the insurance policy or comparable guarantee:
- the legal name, the date and Member State of incorporation or foundation, the address of the head office and, if different, of the registered office and contact details of the undertaking authorised to provide the insurance policy or comparable guarantee;
- a copy of the subscribed insurance policy incorporating all the elements necessary to comply with Article 67(5) and (6) of Regulation (EU) 2023/1114, where available, or
- a copy of the insurance agreement incorporating all the elements necessary to comply with Article 67(5) and (6) of Regulation (EU) 2023/1114 signed by an undertaking authorised to provide insurance in accordance with Union law or national law.
- in relation to own funds:
Share capital v minimum capital requirements
Neither MiCA nor draft of Polish Act on Crypto-assets Market links minimum capital requirements of CASP in Poland with its share capital. Therefore, it is not mandatory for the share capital to meet the minimum share capital requirements. For example, Polish limited liability company (pl: “Sp. z o.o.”) is planning to render services of exchange between crypto-assets and fiat money. Minimum share capital of such CASP is EUR 125.000. However, this CASP does not have to have share capital in the amount of EUR 125.000. Instead, it must have assets in the amount of EUR 125.000 (let’s say as precaution, assets in the amount of EUR 125.000 in fiat money). The assets of Polish LLC are not the same as share capital. Share capital should be understood as the initial founding fund, which consists of the contributions made by shareholders. Therefore, it is primal company’s asset. In addition to share capital, other forms of capital may also be utilized by the company.
However, according to the opinion of our Law Firm in Poland it is recommended for Polish company to maintain share capital at least equal to minimum capital requirements. One of the basic functions of share capital of Polish LLC is guarantee function. Share capital guarantees that the company has a certain property that is the basis for satisfying potential creditors. This reflects the prudential requirements set forth by MiCA.
