Today bitcoins are considered financial products, let's try to explain what that means.
Bitcoins were initially devised for the limited context of video-games, then they spread as a means of payment. Today they are "crypto-currencies", i.e.a currency that can be seen and used only when knowing a specific code.
More in detail, bitcoins are created, stored, and used on electronic devices, where they are stored in personalized accounts or "electronic wallets"("e-wallets").The holder in possession of the alphanumeric access keys can access and transfer them at any time and without the need for the intervention of third parties.
Bitcoins can be purchased for legal tender through service platforms or "exchanges". They conventionally replicate the functions of legal tender.
With the agreement of the parties involved, transactions for the purchase of goods and services can be concluded inthe "peer-to-peer" mode, i.e. between two devices and without intermediaries, just as it happens with legal tender.
That said, it should be noted that virtual currencies:
- are not legal tender,in that they can be accepted as a means of payment only on a voluntary basis;
- are not regulated by central government bodies, but are generally issued and controlled by the issuing body according to its own rules, which the members of the community of reference must adhere to.
The changes by the Italian Court of Cassation: bitcoins are financial products
With Order no. 26807 of 17 September 2020 the Italian Court of Cassation has addressed, for the firsttime during a trial for money-laundering, the theme of the nature
of "virtual currencies" or cryptocurrencies.
The above mentioned Order has gained his place in the history of Italian Law, since it has clearly stated that bitcoins are to be considered as financial products, and as such they are regulated by the Consolidated Law on Finance.
The Italian Court of Cassation focused on evaluating of virtual currency trading activities carried out on a specific website and advertised through Facebook.
The information provided to "potential customers" in order to allow them to decide whether to purchase currency should have been compliant with such mandatory requirements as the publication of information statements and prior communication to CONSOB.
Because of its non-compliance with the aforementioned obligations, the offer of bitcoins, given that bitcoins are financial products, can be considered a criminal offense, that of unauthorized financial activities pursuant to art. 166 paragraph 1) of the aforementioned Consolidated Law on Finance.
But what exactly are financial products?
Art. 1 of the Consolidated Law on Finance defines financial products as typified forms of investment or any investment of a financial nature, characterized by the combined presence of:
- use of capital;
- a financial return expectation;
- assumption of a risk directly connected to the use of capital.
In compliance with what has just been said, contracts whose justification consists precisely in the investment of capital (the "block" of savings) with the prospect of increasing the funds invested without other services by the investor than that of giving a sum of money, can be considered investment contracts with a financial cause (see Order no. 2736/2013 of the Italian Court of Cassation).
Bitcoin as financial products: the consequences of Order no. 2736/2013 of the Italian Court of Cassation?
The consequences of Order no. 2736/2013 of the Italian Court of Cassation: selling bitcoin is a crime without Consob's authorization.
In accordance with the above mentioned principles, the Italian Court of Cassation has stated that selling bitcoins on a website can be considered illegal financial intermediation whenConsob'srules imposed by are not observed. It is worth noticing here, that the European Court of Justice considers cryptocurrencies as payment instruments.
Indeed, according to the Italian Court of Cassation, what matters is the fact that purchasing bitcoins on a site represents a form of investment and, as such, it is subject to controls and authorizations by Consob.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.