KIELTYKA GLADKOWSKI advises on the business processes and implementation of corporate international clients in the use of blockchain technology – or more broadly: distributed ledger technology (DLT).

In particular, our law firm has extensive experience in advising on cross-border issues and trading in crypto assets (hereinafter also: “digital assets”), the legal qualification of which may raise doubts as to the application of Polish regulations governing activities on the financial market, in particular due to the fact that the clients of KIELTYKA GLADKOWSKI operating on the Polish market are related to the following jurisdictions:

– UK;

– Cyprus;

– US;

– Asian markets;

– Belarus and Ukraine and the Balkans, including Turkey;

– Israel;

– Near East;

– India;

– Singapore;

– The Netherlands;

– German-speaking countries.

The following issues are within the scope of KIELTYKA GLADKOWSKI specialization:

– regulatory consultancy in the sale of so-called tokens (Initial Token Offerings – ITOs or Initial Coin Offerings – ICOs) on issues related to the legal qualification of the issue and trading of crypto assets based on this technology;

– advice on issuing and trading crypto assets with features that distinguish DLT technology, such as:

  • direct issuance and trading, consisting in the purchase of crypto assets by investors from their issuer, as well as the execution of transactions between interested parties, without the involvement of institutionalized intermediaries, where the algorithm ensures the settlement of the transaction, providing an intermediary function and guaranteeing the execution of the transaction; this is possible thanks to the peer-to-peer (hereinafter: p2p) communication model which characterizes this technology;
  • decentralization, expressed as the absence of a top-down managed market (trading venues) or markets that concentrate the supply and demand for a given cryptocurrency. Moreover, decentralization makes it possible to use the p2p mechanism to conclude contracts and transfer the value of the crypto-asset within the DLT network directly between network participants. From the technological side, decentralization means, inter alia, no central place where information is collected and no single entity that can be responsible for making decisions regarding the functioning of a given crypto-asset;

– legal assistance for IT business ventures based on Blockchain technology, based on the use of a decentralized and distributed database, with a data structure specified in the protocol (a set of rules defining how different devices can communicate with each other);

– legal assistance to operators of transaction platforms that calculate and confirm the truthfulness of transactions made in its structure in a decentralized and automated manner, keeping a record of completed transactions;

– legal assistance for IT companies operating within the Blockchain network; legal support for the use of cryptographic keys: using pairs of publicly known keys (public keys) necessary to identify transactions;

– legal support for private key designs used to confirm their authenticity and to encrypt transactions.

KIEŁTYKA GŁADKOWSKI’s consulting includes:

Blockchain law – the law of one of the types of DLT technology, a distributed and decentralized register, operating in the open source model, enabling transactions to be performed in the p2p communication model without a central entity approving transactions or storing information. This technology ensures the non-repudiation of transactions and allows for the storage of information about them publicly within the operating nodes with the use of cryptographic security. This makes it much more difficult to modify any information about transactions already stored in the blockchain. Blockchain uses both cryptographic and algorithmic functions to record and synchronize data on a permanent basis within the network. It should be noted that not every distributed data register uses blockchain technology; due to its features, Blockchain can be – apart from storing transaction data – also used for other purposes, such as storing documentation or conducting voting. We can currently distinguish Public, Private and Hybrid Blockchain based on how the rules for accessing information processed on the Blockchain are defined.

handling all legal aspects of DAO (Decentralized Autonomous Organization, i.e. an independent organization operating without a governing body (e.g. a board), the operating principles of which are defined in a computer program);

DeFi (Decentralized Finance) law, i.e. an ecosystem of applications for the provision of financial services based on DLT;

DLT (Distributed Ledger Technology) law – a distributed database technology, where the registers are replicated, shared and synchronized in a network of nodes, which had the following features:

  • (a) may be a decentralized, centralized or partially centralized, shared and replicated registry;
  • (b) may be a public, private or hybrid registry;
  • (c) it is immutable;
  • (d) can be protected by cryptography;
  • (e) changes to the registry are made on the basis of consensus.

handling all legal aspects of crypto-assets – digital mapping of relations between DLT network participants, to whom within this network can be assigned rights of various nature, including, for example, property rights. For this reason, it may be accepted by other market entities and become traded between these entities as saved using cryptographic security using DLT technology (including Blockchain), under which the bundle of rights related to the crypto-asset may take the form referred to as a token;

– assistance within cryptocurrency law, i.e. virtual currency within the meaning of art. 2 clause 2 point 26 of the Act of March 1, 2018 on counteracting money laundering and financing terrorism, where it is understood as a digital representation of value that is not:

  1. legal tender issued by the Polish National Bank, foreign central banks or other public administration bodies;
  2. an international unit of account established by an international organization and accepted by individual countries belonging to or cooperating with that organization;
  3. electronic money within the meaning of the Act of 19 August 2011 on payment services;
  4. a financial instrument within the meaning of the Act of July 29, 2005 on Trading in Financial Instruments;
  5. by bill or check;

– and is tradable for legal tender and accepted as a medium, and can be electronically stored or transferred or be traded in e-commerce;

– handling all legal aspects within Initial Coin Offering / Initial Token Offering (ICO / ITO) – a method of financing business ventures in which the entity issues coins (tokens) in exchange for funds with a specific economic value, both in the form of FIAT currencies as well as in the form of other crypto assets. Funding is expressed directly in FIAT Currency or other cryptocurrency;

– handling all legal aspects of Initial Exchange Offering (IEO) – a financing method similar to ICO / ITO / STO consisting in the use of a specialized trading platform (crypto-asset exchange) when conducting the issue of crypto assets (tokens). IEO is used to determine the value of projects that may be limited in amount;

– handling all legal aspects of modern financial instruments – i.e. property rights referred to in Art. 2 clause 1 of the Act on Trading in Financial Instruments;

– advising on securities law – i.e. financial instruments referred to in Art. 9216 of the Civil Code and in Art. 3 point 1) of the Act on Trading in Financial Instruments.

providing assistance to crypto asset trading platforms – platforms operating on the basis of DLT technology (including Blockchain), on which the issue and trading of crypto assets is carried out, which may take the form of a decentralized or centralized platform;

providing legal support for supervised entities – entities subject to supervision over the financial market in accordance with the Act on Financial Market Supervision;

– rendering legal support for entities providing the service of offering a crypto asset wallet (crypto-assets wallet providers);

legal support for entities providing the crypto asset storage service, which may take place in various ways, including through online storage (so-called hot storage) or offline (so-called cold storage);

all legal aspects of Proof of work (POW), proof of stake (POS) – the right of selected consensus mechanism models within the DLT network enabling its operation and transaction verification;

Security Token law Offering (STO), including all legal aspects of the financing method consisting in the issuance of tokens, which, according to their creators, are to act as securities and other non-securities instruments, in particular through the existence of the right (in various forms) to return on the invested capital, which in terms of the subjective scope, may be unlimited (the number of entities to which it is offered);

court representation of international clients in terms of qualifying tokens as securities, which until the introduction of legal solutions is performed by common courts, which are only authorized to interpret legal provisions in specific factual states;

Smart Contracts law – i.e. legal aspects of computer programs executed automatically in accordance with given conditions, which automate the relations between the parties to the transaction. They are launched as part of a specific DLT network, including blockchain, being fully automated, while the possibility of introducing changes to the Smart contract structure after its launch may be significantly difficult or impossible. Smart Contract allows, among others, to transfer tokens (coins) between the parties to the transaction. It may perform other, additional functions, e.g. define the conditions for the transfer of tokens (coins) between the parties to the transaction. In the event of meeting certain formal and legal requirements (including defining mutual rights or obligations of the parties), it may fulfill the characteristics of a contract within the meaning of civil law;

assistance within Tokenization law – KIELTYKA GLADKOWSKI provides legal support for the phenomenon of using DLT to reflect the good / asset in the form of a token indicating the rights / obligations associated with the primary asset (secondary tokenization), or to create tokens inextricably linked with the newly created good / asset (primary tokenization);

FIAT Currency law – advising on legal aspects of legal means of payment issued by central banks (also known as fiat currency);

– any legal issues regarding the so-called “Whitepaper” – documents prepared by the creator (issuer) of a given cryptocurrency, due to the lack of a legal framework directly regulating this cryptocurrency in this respect;

legal support for the creation of documents by issuers required by Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published in connection with a public offering of securities or their admission to trading on a regulated market, and repealing Directive 2003/71/EC, as well as the provisions of the Polish Act on Public Offering;

– legal support for documents including, inter alia,

1) the conditions for placing the cryptocurrency on the market,

2) description of the system architecture constituting the basis for its functioning,

3) an indication of the distributed ledger system it uses,

4) a description of the incorporated powers,

5) the method of their acquisition.

legal assistance within tokens law (currency type tokens / exchange tokens):

1) which are generated by the algorithm as a form of reward for participation in the consensus process (e.g. as part of the proof of work), and should not be equated with a means of payment, in particular electronic money, because they are generated autonomously by the algorithm itself and automatically purchased (“Mined”) by the user rather than distributed to the user by a central entity with an option to subscribe;

2) which meet the definition of electronic money, as specified in art. 2 point 21a of the Act on Payment Services. This is due to the existence of a central money issuer and the fact that the tokens represent a fixed value expressed in money and are subject to the issuer’s obligation to repurchase them. The issuance of such tokens is associated with the fulfillment of the requirements provided for in specific regulations, including the Act on payment services for entities that are authorized to issue electronic money (such authorization is granted to, inter alia, banks, national payment institutions and electronic money institutions). When issuing tokens for which the issuer undertakes to redeem them, one should also take into account the possibility of violating the provisions of the Banking Law Act prohibiting the collection of funds from the public for return in order to charge these funds with risk. It should be remembered that risk exposure is understood in particular as granting loans from the funds raised or continuing to invest them in a way that potentially threatens the return of the original amount. Pursuant to Art. 171 sec. 1 of the Banking Law Act, conducting activities without a permit consisting in collecting funds of other natural persons, legal persons or organizational units without legal personality for the purpose of granting loans, cash loans or risking such funds in any other way, is subject to a fine of up to PLN 10,000,000 and imprisonment for up to 5 years. Thus, the activity in the field of issuing electronic money requires the authorization of the Polish Financial Supervision Authority. In the case of issuing electronic money without the required permit, Art. 150 of the Payment Services Act applies, according to which: who, without being authorized, conducts business in the field of issuing electronic money, is subject to a fine of up to PLN 5,000,000 or imprisonment for up to 2 years, or both of these penalties jointly;

legal assistance within tokens law (utility tokens); crypto-assets that give users the option to purchase goods or services that are or will be offered in the future by a voucher issuer or entitle them to a discount for such goods or services;

legal assistance within the law of investment tokens (investment / security tokens), within which the following types can be distinguished:

  • a) tokens that incorporate rights identical to those incorporated in securities;
  • b) tokens which, due to the rights incorporated in them, fully or partially correspond to the participation titles (rights) in collective investment undertakings (investment fund, alternative investment company);
  • c) tokens that are financial instruments other than those listed in point a) and b) above;
  • d) investment tokens based on the rights resulting from participation in a limited liability company, to the extent other than described in point a) and b).

As part of the specialization, KIELTYKA GLADKOWSKI works on the analysis of the following legal sources:

• Act of April 23, 1964 – Civil Code (Journal of Laws of 2019, item 1145, as amended; hereinafter: the Civil Code);

• the Act of June 6, 1997 – Penal Code (Journal of Laws of 2019, item 1950, as amended; hereinafter: the Penal Code);

• Act of September 15, 2000 – Code of Commercial Companies (Journal of Laws of 2019, item 505, as amended; hereinafter: the Commercial Companies Code);

• Act of 27 May 2004 on investment funds and management of alternative investment funds (Journal of Laws of 2020, item 95, as amended; hereinafter: the Act on Funds);

• Act of July 11, 2006 on supervision of the financial markets (Journal of Laws of 2020, item 180, as amended; Act on supervision over the financial markets);

• Act of January 15, 2015 on bonds (Journal of Laws of 2018, item 483, as amended; hereinafter: the Act on Bonds);

• Act of July 29, 2005 on Trading in Financial Instruments (Journal of Laws of 2020, item 89, as amended; hereinafter: the Act on Trading in Financial Instruments);

• Act of July 29, 2005 on public offering and the conditions for introducing financial instruments to an organized trading system and on public companies (Journal of Laws of 2019, item 623, as amended; hereinafter: the Act on Public Offering);

• Act of May 30, 2014 on consumer rights (Journal of Laws of 2020, item 287, as amended; hereinafter: the Act on consumer rights);

• Act of March 1, 2018 on counteracting money laundering and financing terrorism (Journal of Laws of 2020, item 971, as amended; hereinafter: the Act on Counteracting Money Laundering and Terrorism Financing);

• Act of 19 August 2011 on payment services (Journal of Laws of 2020, item 794; hereinafter: the Act on payment services);

• Act of May 14, 2020 amending certain acts in the field of protective measures in connection with the spread of SARS- CoV -2 virus (Journal of Laws of 2020, item 875);

• Act of August 29, 1997 – Banking Law (Journal of Laws of 2019, item 2357, as amended; hereinafter: the Banking Law);

• Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (Journal of Laws UE L 302 of 17.11 2009, p. 32, as amended);

• Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on alternative investment fund managers and amending Directives 2003/41/EC and 2009/65/EC as well as Regulations (EC) No 1060/2009 and (EU) No. 1095/2010 (Journal of Laws UE L 174 of July 1, 2011, p. 1, as amended);

• Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published in connection with a public offering of securities or their admission to trading on a regulated market and repealing Directive 2003/71/EC (Journal of Laws UE L 168 of 30/06/2017, p. 12, as amended (the so-called Prospectus Regulation).