Polish payment and currency exchange services provider Cinkciarz.pl (Conotoxia) has filed a legal challenge against the country's market watchdog KNF over the revocation of its operating license. The fintech argues that the regulator's decision could harm customer interests rather than protect them.

Cinkciarz.pl Challenges License Revocation, Citing Customer Risk

The Warsaw-based fintech company is contesting KNF's October 2 decision to withdraw its domestic payment institution license, taking the matter to the Voivodeship Administrative Court. The dispute centers on the regulator's interpretation of how customer funds should be held and protected.

"The authority's decision could lead to significant hindrances and delays in service provision to our customers," said a Conotoxia representative in court documents. "This outcome would be precisely opposite to the intended effect of ensuring market stability and user safety."

At the heart of the dispute reportedly lies KNF's changed stance on Conotoxia's long-standing practice of using bank accounts belonging to its agent, Cinkciarz.pl, to hold customer funds. The company argues this arrangement had been accepted by the regulator since 2017 without objection.

“The only way to minimise this risk and to rectify the mistakes made in the Authority's actions is to suspend the enforceability of the decision and to revoke it,” the statement added.

The payment provider maintains that KNF's interpretation of the Payment Services Act extends beyond both the act's content and underlying EU regulations. Particularly contentious is the regulator's position on segregated bank accounts and the calculation methodology for protected funds.

The standoff between Poland’s financial regulator and Conotoxia has been going on for over a month. On one side, the company accuses the KNF of “violating the law” and “destroying” businesses. On the other, the Polish regulator has issued a negative recommendation against the fintech as it seeks a European banking license to continue its operations.

Banking Sector Challenges

The case highlights broader challenges facing Poland's fintech sector. Conotoxia reports that attempts to comply with KNF's new requirements have been met with resistance from banks, with all but one refusing to modify account agreements or provide requested bank guarantees.

Cinkciarz.pl has initiated actions not only against Poland’s KNF but also against the banking sector, alleging a 14-year-long blockade of its transfers totaling $300 million.

The money exchange company plans to sue nearly all major banks operating in Poland, accusing them of "conspiracy." The lawsuit already targets 11 entities, with Cinkciarz.pl seeking a total of 6.75 billion zlotys ($1.65 billion) in damages.

Operational Impact

Despite the regulatory concerns, Conotoxia emphasizes its operational stability, noting that only four out of 224 customer complaints in the first half of 2024 related to transaction delays. The company argues this track record contradicts KNF's assessment of its financial situation.

Cinkciarz.pl is actively seeking ways to navigate its challenging regulatory situation. Beyond pursuing a European banking license, the company previously announced its intention to secure a foreign investor. Nearly a month ago, Cinkciarz.pl revealed it was in "advanced talks" with an investment fund whose support could help stabilize its operations.

The issue primarily concerns Conotoxia Sp. z o.o., a subsidiary of Cinkciarz.pl registered in Poland. It's worth noting that this entity is distinct from Conotoxia Ltd., a Cyprus-registered company responsible for the fintech's retail FX/CFD trading business.