Digitisation of Polish money
Poland’s first clearinghouse for cash-free payments was established in 1990. In 1991 the first payment cards for individual clients were issued in Poland. The history of cash-free trade in this country now goes back over a quarter-century. But one of the key Polish regulations governing money—the Foreign Exchange Law—has not kept pace with the evolution of the forms in which money is used, but remains fixed in times when the dominant form of money was cash. There are many signs that this state of affairs may soon change.
This may come to pass thanks to a proposal to amend the Foreign Exchange Law which has been submitted to the Sejm. When advising clients seeking to introduce innovative financial services, we have often observed recently how anachronistic and unsuited to the realities of cash-free trade the Foreign Exchange Law is. This is also a much broader issue, extending beyond the Foreign Exchange Law. Many other legal acts, for example in the area of criminal law, lack provisions suited to cash-free trade.
The failure to adapt regulations to match the contemporary realities is particularly striking in the case of online currency exchanges, and the legal situation of the operators of such exchanges was the direct impetus for the current legislative proposal. The purpose of the proposal is very clear: to extend the coverage of regulations governing bureaux de change to include all forms of activity consisting of currency exchange, regardless of the form or location of the exchange. Under the proposal, bureau de change activity would include exchange of cash for cash, exchange of currencies using automatic devices, and exchange via telecommunications.
According to the proposal, this goal would be achieved primarily through an appropriate modification of the concept of “currency” used in the Foreign Exchange Law to cover tangible money, electronic money, and accounting entries. The last of these notions is particularly important. It appears the drafters’ intention is to use this to cover the greatest aggregation of money in the contemporary world—the classic cash-free money known as bank money.
The aim of the proposal should be regarded as a positive development primarily because it would eliminate the division between regulated bureaux de change exchanging money in the form of cash, and unregulated bureaux de change exchanging money in cash-free form—a distinction that is inexplicable from a systemic perspective. But before final adoption, certain elements of the bill need to be clarified. Two of these items seem especially important.
Undoubtedly the concept of “accounting entry” used in the proposal is fundamental. The proposal does not define this term, which is understandable to some extent because it is difficult to come up with a good legal definition. But avoiding definitions creates a danger of doubts in interpretation. For example, to what extent could this term apply to the increasingly popular cryptocurrencies? Under the proposed definition of “Polish currency” and “foreign currency,” there is no formal requirement that an accounting record constitute legal tender (this requirement applies only to tangible money). It is also unclear whether the term “expressed in Polish currency” (or “expressed in foreign currency”) refers only to electronic money or also to accounting entries. This doubt is of vital practical significance. Alongside online bureaux de change exchanging traditional currencies, sites exchanging crytocurrencies have also been gaining popularity recently. Will exchange of crytocurrencies also be treated as a form of bureau de change activity?
Another doubt is whether the drafters intend the term “automatic currency exchange device” to apply also to ATMs. If so, it would be good to specify who exactly is conducting bureau de change activity in the case of currency exchange using ATMs (the ATM operator, the card issuer, or someone else?) A precise boundary should also be established between bureau de change activity conducted using automatic devices and conversion of currencies by payment institutions when performing payment transactions (Art. 74 of the Payment Services Act), which is excluded from the regime of the Foreign Exchange Law.
Krzysztof Wojdyło, New Technologies Practice and Payment Services Practice, Wardyński & Partners
The article is a part of the New Technologies Newsletter, August 2015