In an earlier article I wrote about FinTech in the draft Polish Capital Markets Strategy (SRRK). There were lots of FinTech strands in the strategy, undoubtedly confronting one of the identified structural barriers to the growth of the capital markets in Poland, described as “outdated technologies or a lack of technologies in key segments of the market, including inadequate investment in FinTech solutions.”
The final version of the SRRK strategy, adopted by the Council of Ministers on 1 October 2019, continues to devote many remarks to FinTech. Use of competitive new technologies is included among the five fundamental principles to be followed in implementing the strategy. Considering that over the last few years there has hardly been any technology generating as much interest on the financial markets as DLT/blockchain, it was natural to include it in the strategy.
The strategy points to the efforts of various teams involved in the topic of blockchain, such as the working group on distributed ledgers and blockchain established within the distributed ledgers stream of the Task Force “From a Paper to a Digital Poland” operating under the auspices of the Digital Affairs Committee of the Council of Ministers. So far most of the results produced by such teams have been exclusively academic or theoretical, even though some of the projects have had practical potential in fields also covered by SRRK.
One of the calls for action included in SRRK directly addresses this group of technologies, defined as “introduction of a legal framework for distributed ledger technology (DLT) and positioning of cryptographic assets on the Polish market.” According to the strategy, within the next few years development of EU regulations should consolidate the positioning of cryptographic assets (a term which the strategy apparently uses to refer primarily to financial instruments in cryptographic form, such as blockchain tokens), “with settlement to and from fiduciary currencies or using token swaps.” The strategy thus suggests analysing the possibilities for using DLT on the capital market and proposes a specific project in this area, a national pilot programme to evaluate solutions for securities of private companies using permissioned blockchain.
SRRK also suggests that experiences gained through this project should be exploited by framing future regulations on blockchain and tokenisation at the EU level, expressly referring to “lobbying in Brussels.” Under this strategy, introduction of blockchain technologies in Poland should proceed hand in hand with the development of relevant regulations, while ensuring adoption of an appropriate approach by the European Union.
Elsewhere SRRK expands on the aspect of exploiting blockchain technologies for secondary trading of securities of private companies, calling for “establishment of legal, regulatory and operational grounds for launching private markets for peer-to-peer retail trading, functioning under various models, using modern technologies such as blockchain, for qualified counterparties,” and expressly referring to the institution of the new simple stock company in this context.
The final version of the strategy also maintains the plan to introduce a regulatory sandbox for FinTech businesses. Although this demand addresses the market for financial innovations more broadly, in Poland it was strongly recommended by the blockchain sector as far back as 2016. In this sense, a regulatory sandbox is also a major topic from the perspective of blockchain solutions, although the strategy does not outline the details for this solution, which could vary.
The strategy also calls for consideration of applying solutions involving implementation of blockchain technology in the context of treasury savings products, particularly treasury bonds (also in the context of tokenisation of bonds), as well as use of blockchain in settlements for OTC derivative instruments. The latter proposal is justified by how it would raise the competitiveness of the Polish market by supporting solutions fostering further growth in transaction and post-transaction infrastructure for derivatives not subject to mandatory central settlement. This involves conducting a feasibility study for use of blockchain (or other modern technology) in bilateral settlement of derivatives transactions, which technology could contribute to development of the competitive advantage and attractiveness of the Polish market.
The blockchain-related plans and postulates set forth in the Polish Capital Markets Strategy are interesting and ambitious. So far they remain at a fairly general level, but this is natural for a document of a strategic nature. Further actions will show to what degree these proposals take hold in practice.
Jacek Czarnecki