In contrast to many of its European counterparts, the Polish cryptocurrency market remains unregulated--therefore, crypto-activities within the country are fully legal, at least in theory.
Despite this, the Polish Financial Supervision Authority (KNF), has issued a number of warnings over the past year about the actions of many local cryptocurrency exchanges, forcing some of them to emigrate.
However, newly-established cryptocurrency exchange Coinquista shows that the situation may change and that Poland will soon host more fully-fledged digital asset companies.
Polish Regulator "KNF" is Concerned About Payment Processing
The problem with many Polish crypto exchanges mainly concerns the processing of Payments . KNF concluded that cryptocurrency companies hold and process client payments without proper authorization and that therefore, their activities may be illegal.
In attempts to fight this problem, some entities have applied for the status of a "small" (MIP) or "national" (KIP) payment institution. In 2019, two entities--BitClude and Coinquista--became the first crypto companies to be officially authorized by KNF.
Recently, Finance Magnates had the opportunity to conduct an exclusive interview with Ireneusz Pukin, the founder and president of Coinquista. Pukin spoke on the complexity of the Polish crypto space and payment regulations.
Pukin also talked about Coinquista’s development plans, which are to focus not only on crypto trading itself but also on the creation of new digital economy services.
Finance Magnates: When did you come up with the idea to set up cryptocurrency exchange on your own? Was it before the crypto boom that we witnessed almost two years ago?
Pukin: My first plan for setting up a cryptocurrency exchange appeared a long time ago. If I remember correctly, Bitcoin was quoted at about $600 and was heading towards the historical breakthrough of the $1000 barrier.
However, the first attempts were unsuccessful. At that time in Poland, only a few people knew what crypto was. Therefore, we lacked investors who could support the project with more capital.
Thankfully, the situation reversed dramatically during the biggest Bitcoin rally at the turn of 2017 and 2018. We managed to attract investors to the project, who (apart from purely speculative price movements) also saw the potential behind the still young and dynamically developing market, knowing that prices could fall sharply--which, of course, they quickly did.
Finance Magnates: Speaking of market downturns, you are surely aware of the fact that the current situation does not seem to be the most favorable for the start of a new exchange like Coinquista. Volumes are falling, and consumers are selling their crypto reserves. What are your thoughts on this?
Pukin: Paradoxically, the current market condition is actually very good for us.
We started practically at the bottom. Thanks to that, we have not incurred too many costs (e.g., related to employment.)
A lot of our services, including platform development, are outsourced. Thanks to this, Coinquista can afford much greater flexibility and respond quickly to the needs of a changing market. Looking at the current situation, this seems to be a much better solution than having a well-developed, permanent team of professionals.
Today's situation is similar to the one observed in the last decade after the dot-com bubble burst when the biggest pessimists foretold the end of the Internet era. However, over the years that followed, we saw a completely different and new market, with services and products that previously seemed unnecessary.
I expect the same in the case of Cryptocurrencies - an unprecedented wave of products and assets which are still waiting to be created.
So, my company's goal is not to maximize daily trading volumes in bitcoins or altcoins, but to create an alternative trading ecosystem where people can exchange and trade in tokenized assets.
Finance Magnates: What are Coinquista's plans for the near future? As far as I know, the demo platform was already launched, but what about the full version and crowdfunding?
Pukin: So far, we have managed to guarantee the funds for the start of the basic activity of the cryptocurrency exchange.
Until 18th May, we are conducting crowdfunding (offering shares in the company.) The goal of this is to gain more resources with which to expand the business; we will continue to add additional functionalities and will gain the ability to open up to new markets.
Once we have reached our crowdfunding goals, the first plans are to launch a mobile application and social trading.
However, if the goal of 4 million PLN will not be achieved, then the development will also take place, but more slowly, more organically.
At the moment, we are offering access to a test version of the platform to all interested parties. After an external audit, we intend to launch the official version of Coinquista, which is scheduled to start at the end of April 2019.
To be honest, there is still a big issue with conducting marketing campaigns via platforms such as Facebook and Google. Some time ago, these and other advertising giants blocked the possibility of promoting services related to crypto assets.
Although they have now departed from this ban, they still impose stricter requirements before adding any given entity to the "whitelist."
While we have taken the necessary steps to obtain marketing permits, we are still waiting for a decision.
When we run a crowdfunding campaign aimed at financing additional functionalities of our exchange and the whole project, this has been particularly challenging. As a result of these monopolists' requirements, we had to remodel our campaign and focus on more direct actions, including contacts with industry websites.
Finance Magnates: Why should potential customers reach for Coinquista services rather than choosing competitors offering?
Pukin: From the very beginning, I was convinced that a better cryptocurrency exchange could be built.
Looking at the available options, I had the impression that experienced traders were not consulted during the building process. Hence, we conceived an exchange that is faster, has more functionality, and better customer service.
In a few months' time, I want to achieve a point where our consumer support team can be described as the best in Europe or even around the world. I want to transfer my experience from the stock exchange and forex industry, where clients can count on private account manager from the very beginning. Clients deserve to know exactly who they are talking to, and not to have to wait days or weeks for an answer.
In the era of the cryptocurrency boom, things like this seemed insignificant, but in more difficult market conditions, it looks to be one of the most important success factors.
In my opinion, we are on the right track to create something that is of interest to consumers. We want to reach customers who expect more from a crypto exchange. They do not look for solutions that allow them to perform all operations anonymously, but rather expect transparency and compliance with local regulations.
We are aware of the fact that there are well-established entities on the market, which already generate high and stable volumes. But this does not mean that there can be no place for a new player in this unsaturated market--a player who will do certain things better.
Finance Magnates: Let’s talk about cryptocurrency regulation in Poland. Coinquista boasts the title of the first digital exchange that has been accredited by KNF. Can you share the details with us?
Pukin: Thanks to the entry in the registry of small payment institutions (MIP), the payment activities of Coinquista are fully regulated and supervised. [This is in spite of the fact that] KNF does not offer an appropriate legal framework concerning digital assets. In my opinion, the KNF should act comprehensively in this area in order to dispel any doubts.
For the time being, however, we are making use of the legislative ecosystem to carry out regulated and legal activities as far as possible. At the same time, it should be emphasized that at the moment, crypto-related activity is fully permitted in Poland.
Of course, we must comply with certain rules related to KYC (know your customer) and AML (anti-money laundering), but there are no indications that running cryptocurrency company is not a legal business.
Finance Magnates: If running a cryptocurrency exchange in Poland is fully legal, then why does KNF keep adding other crypto-related firms to its warning list, including BitBat, the biggest Polish firm in the industry? Are you not afraid that a similar fate awaits Coinquista as well?
Pukin: This is the common problem of the majority of Polish exchanges which suddenly found themselves at the center of the supervisor's attention. Storing and processing clients' funds without KNF authorization ultimately resulted in the authority taking control of the crypto industry and issuing unfavorable recommendations for Polish exchanges.
For this reason, among others, BitBay decided to move to Malta.
In light of the negative experiences of other domestic crypto companies, the first step that I took while planning Coinquista's activities was to obtain a legal opinion from the KNF itself. We wanted to find out what we had to do to meet the requirements of the regulator and to be able to operate without any fear in Poland.
As a result, we received clear guidelines from KNF, which showed that the MIP license allows us to operate as the crypto exchange to a certain extent. For the full ability to process funds without volumes restrictions, we were told that a KIP license is a must.
Of course, I considered doing business in Malta, Gibraltar or another location with more favorable legislative conditions. But since we have confirmed that a company can operate legally in Poland, I decided that there is no such need.
In the future, a license obtained in Lithuania may also be an additional security measure that we will take. We also do not exclude the possibility of applying for licenses on other continents, including North America or Asia.
Finance Magnates: Can you describe the main differences between MIP and KIP licenses? Are they sufficient for the free development of the cryptocurrency exchange or do they impose a certain restriction on your business from the very beginning?
Pukin: Entering the list of MIP entities entails certain restrictions as to further development possibilities. It also does not allow us to offer our clients all the functionalities and payment options right from the start that we will finally want to use.
This is why instead of fiat currency, our users will use stablecoins connected with the most popular traditional currencies, including zloty, euro, pound, and dollar. Deposits will be made using typical methods, then exchanged to their crypto counterparts (1:1) used for executing transactions.
The decision to create our own stablecoins is aimed at taking care of our clients' security. At the moment, there are so many tokens reflecting the exchange rates of fiats on the market that we are not able to give a full guarantee of their reliability.
By creating our own stablecoins (which can be exchanged, transferred and traded) and taking care of their regular external audits, we will give ourselves and our clients a guarantee that their funds are completely safe.
Finance Magnates: according to the project roadmap presented, the crypto exchange is only a part of the services that you want to provide. What will the products ultimately offered by Coinquista look like?
Pukin: For Coinquista, the cryptocurrency exchange is only a part of the business we want to develop. We strive to expand our business with the possibility of shares trading by organizing an alternative trading market through the tokenization of companies, real estate (e.g., office buildings, hotels), and even whiskey producers.
We want to create a market that fits into the new economy while allowing people to make a conscious choice of currency that they ultimately want to pay in the shop--traditional or digital.
Looking a few years ahead into the company's development, we want to think about the cryptos, not in the current context, but to see them as a technology that will make it possible to create the aforementioned alternative trading system in the future.
We are also planning to launch our own crypto fund, and are currently in talks with an investment company that is interested in implementing this type of product into its offerings.
At this current moment, we are developing the statute of the entity's activity and working on obtaining KNF accreditation, so that we can become the first fund of this type in Poland.
I do not think that creating a fund based on digital assets is too risky. Every market can fall into bearish trends. This is plain to see when it comes to more traditional stock trading.
Moreover, Bitcoin's recent volatility trends have been smaller than the volatility of the pound. Looking at the cryptocurrencies as the new asset class, the activity of such funds is no different from the "traditional" solutions.
As a result, Coinquista will be offering access to a wide range of services--using not only cryptocurrencies but also the technology behind them. That is what the main game is really going on at this point, not how much the cryptocurrencies will cost.
Prices should not be our concern. Remember that only 21 million bitcoins will be in circulation at the end. I have always believed that everyone should have one bitcoin (or at least a part of it) in order to see how prices will develop in the future, taking into account the restricted and fixed supply.
Finance Magnates: You have talked a lot about tokenization, new economy, and an alternative trading system. Could you explain more precisely what you meant?
Pukin: Imagine a company that is not listed on the regular stock exchange, but has a public company status. When we deal with its shares, trading in them is extremely difficult. It is plain to see that in Poland and many other places that there is not really a single place to sell them.
So, by tokenizing these shares, we can place them on the digital assets market. The token becomes directly related to the value of the company and corresponds to ownership rights in that company. It is true that traditional financial institutions still look at such solutions unwillingly, but this is mainly due to ignorance and lack of technological preparation for the revolution that is taking place in front of our eyes.
