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Crypto projects that are best not opened in Poland. Reasons and alternatives

by Anamta bnn
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What Are the Specific Regulatory Challenges That Make Poland Less Favorable for Launching Certain Crypto Projects?

Despite a relatively simple procedure for actually forming a company, Poland is somewhat fraught with regulatory hurdles. Some of the main obstacles are:

  • Language Issues. All registration documents must be in Polish, necessitating sworn translators for non-Polish speakers and document owners;
  • Strict AML/KYC. Companies are required to implement thorough anti-money laundering (AML) and know-your-customer (KYC) processes. This includes the employment of a competent AML officer.
  • Compliance and Documentation. Comprehensive documentation of all software, hardware, and internal procedures is required. Registry delays or flat-out refusals can result from noncompliance.
  • Background Checks. In order to pass the background check, the founders and directors must not only be free of criminal records but also have appropriate work or academic expertise in the field of finance or crypto.
  • Needlessly Complex Steps for Applying. It may take several weeks to get the essential identifiers (REGON, NIP, VAT) and register with the National Court Register (KRS).

Which Types of Crypto Projects Face the Most Difficulties in Poland, and Why?

The most challenged crypto projects in Poland are those with little funding and no expert legal or regulatory counsel. The regulatory framework’s complexity demands precise adherence to numerous requirements. This includes the above-mentioned points: providing thorough AML/KYC processes, detailed documentation in Polish, and evidence of professional competence.

It becomes more difficult to navigate these standards without expert support. That, of course, increases the danger of non-compliance and delays. Sworn translators, attorneys, and anti-money laundering (AML) officers may also be expensive and out of reach for initiatives with little funding. The minimum permitted capital, registration fees, and the expenditures of virtual office services are among the several expenses associated with establishing a Limited Liability Company (Sp z.o.o), too.

So, in short, all these financial and procedural hurdles are particularly burdensome for smaller projects.

How Do Poland’s Tax Policies Impact the Viability of Crypto Projects in The Country?

The feasibility of any cryptocurrency venture is heavily influenced by the country’s tax rules. When it comes to Poland, several modifications were introduced by the recent revisions to the Polish Corporate Income Tax Act:

  • Capital Gains Exemption. An improvement to the tax advantages for firms with subsidiary holdings. It now applies regardless of whether the sold company holds at least 5% of another company’s shares.
  • Minimum Income Tax. Reducing immediate tax burdens on less profitable enterprises, the minimum income tax will be suspended until year-end and the profitability ratio will be increased to 2%.
  • Tax Haven Transactions. The reporting requirements for transactions with tax haven firms are more stringent. The increased documentation criteria is now 2.5 million PLN for financial transactions and 500,000 PLN for non-financial transactions.

Beyond that, compliance expenses might rise even higher if the OECD’s Crypto-Asset Reporting Framework (CARF) were to be adopted. It would further complicate tax reporting for Poland crypto license holders.

What Are the Legal and Compliance Hurdles for Crypto Businesses Operating in Poland?

Several legal and regulatory challenges confront Polish crypto businesses, including the ones listed below:

  1. Sworn translators will be needed for non-Polish speakers since all necessary papers must be in Polish;
  2. The lengthy registration process for a limited liability company (Sp z.o.o.) includes having paperwork notarized, registering the local office space, and obtaining a business bank account, among other things;
  3. To be in compliance with anti-money-laundering (AML) and know-your-customer (KYC) regulations, cryptocurrency firms must implement stringent policies and processes;
  4. Businesses must submit thorough business strategies and documentation of internal processes before registering with the Register of Virtual Currencies.

Are There Any Recent Examples of Crypto Projects That Struggled or Failed Due to The Regulatory Environment in Poland?

It is not ethical to name names, but a number of recent crypto ventures in Poland have run into problems due to the country’s legal climate. The need to translate all documents into Polish and comply with thorough AML/KYC processes, mentioned over and over again in this text, are just two examples of the complex paperwork requirements that have caused substantial delays and raised expenses for some companies.

What Are Some Alternative Countries with More Favorable Conditions for Launching Crypto Projects, and What Advantages Do They Offer?

Luckily, Poland isn’t the only country in the world that can be a good place for your crypto firm. Well-known alternatives are:

  • British Virgin Islands. The Islands are a great place for crypto companies to set up shop because of their low bureaucracy, quick company formation, and zero taxation. The straightforward process makes it easy to start and operate.
  • Gibraltar. It is well-known for its advantageous licensing policies and very low tax rates. Its regulatory climate encourages innovation by catering to blockchain, Web3, and crypto companies.
  • Cayman Islands. The tax haven of the Cayman Islands is perfect for cryptocurrency ventures because of its crypto-friendly regulatory environment and zero-tax policy. If you’re an entrepreneur looking for a place to set up shop with little red tape, this may be the place for you.
  • Montenegro. It provides a straightforward and adaptable establishment procedure in addition to a corporate income tax (CIT) of 9%. An appealing alternative for crypto firms, thanks to its business-friendly atmosphere and supporting regulatory circumstances.

How Can Crypto Entrepreneurs Assess and Compare Different Jurisdictions to Find the Best Location for Their Projects?

Here are some important criteria that crypto entrepreneurs should consider when comparing various jurisdictions:

  1. Fiscal Policy. Assess the tax rates for individuals and corporations, taking into account any tax advantages associated with cryptocurrency. The lack of taxation in some jurisdictions, such as the Cayman Islands and the British Virgin Islands, is a major perk.
  2. Regulatory Environment. Examine the local rules’ ease of compliance to assess the regulatory environment. Countries that are welcoming to cryptocurrencies, such as Gibraltar and Montenegro, provide easy establishment procedures and very, very flexible licensing.
  3. Setup and Operational Expenses. Think about all the money you’ll need to pay for things like legal fees, business registration, and continuing compliance as you set up and run your company.
  4. Setup Time. In terms of setup time, you should seek locations like the British Virgin Islands that have simple and quick procedures for forming a corporation.
  5. Stability and Reputation. Consider the reputation of the jurisdiction within the cryptocurrency sector as well as its political and economic stability.

By taking into account all these aspects, crypto entrepreneurs may choose the ideal site for the company, the one that suits their company’s all requirements and aims.