The legislative decree of September 5, 2024, No. 129, published in Official Gazette No. 215 on September 13, 2024, implements the provisions of the European Regulation 2023/1114, known as MiCA (Markets in Crypto-Assets Regulation), into Italian law.
The MiCA Regulation introduces a unified framework across the European Union for the issuance, public offering, and provision of services related to crypto assets.
The new rules primarily focus on the regulation of crypto-assets, market transparency, investor protection, and the proper management of financial assets.
Amendments were also made to the Italian Banking Act (Legislative Decree 385/93) and the Italian Consolidated Finance Act (Legislative Decree 58/98).
The MiCAR Regulation will come into full effect on December 30, 2024, while the provisions for issuance, public offering, and trading admission of EMT and ART have been in effect since June 30, 2024.
Once fully operational, crypto-asset service providers will be required to adhere to the same anti-money laundering obligations as financial intermediaries. New sanctions will take effect from December 30, 2024, while the possession of cryptocurrencies has already been regulated by the "2023 Budget Law," which provides for taxation.
Types of Crypto-Assets
The MiCAR Regulation classifies crypto-assets into:
- E-money Tokens (EMT): Tokens that aim to maintain a stable value by referencing a single official currency.
- Asset-Referenced Tokens (ART): Tokens that aim to maintain a stable value by referencing another value, a right, or a combination thereof, including one or more official currencies.
- Other-than-EMT and ART crypto-assets: This category includes crypto-assets other than EMT and ART.
The issuance, public offering, and trading admission of ART or EMT, along with the provision of services for crypto-assets, are reserved for entities specifically identified by MiCar.
Particular attention will be given to ARTs offered to customers for payment purposes, as they are subject to significant value fluctuations and cannot rely on a fiduciary element based on redemption at face value.
The Bank of Italy, in enforcing MiCAR, considers other-than-crypto-assets, especially those not backed by underlying assets (unbacked), unsuitable for payment purposes. EMTs remain the most reliable crypto-assets with a payment function.
Supervising MiCAR
According to Legislative Decree No. 129, in Italy, the supervision of crypto-asset service providers is assigned to Consob and the Bank of Italy, designated as the competent authorities under MiCAR.
To operate in Italy, it has been necessary to register with the Organismo Agenti e Mediatori (OAM) and meet certain obligations, especially concerning anti-money laundering.
After the reform, industry operators must demonstrate their competence by passing a test. Only after passing this test will they receive authorization to operate from Consob and the Bank of Italy, which will continue to monitor their activities.
The competencies of the Bank of Italy and Consob are complementary and differ in terms of areas of operation and specific objectives.
Consob has investigative powers, can impose administrative sanctions, and take corrective actions in cases of violations.
It oversees conflict of interest management and complaints procedures, ensuring that token issuers and cryptocurrency service providers act in the interest of token holders. It also serves as a contact point with the European Securities and Markets Authority (ESMA) and the competent authorities of other member states.
The Bank of Italy plays a prudential supervisory role. It verifies the capital adequacy and risk management of asset-linked token issuers and cryptocurrency service providers. It can conduct inspections, gather information, impose administrative sanctions, and take corrective measures, including suspending operations in cases of serious irregularities.
It has the power to order compulsory administrative liquidation and other extraordinary measures in cases of significant capital losses or insolvency.
It supervises the proper functioning of the payment system, ensuring the security and efficiency of financial transactions.
The Bank of Italy and Consob can also carry out searches and seizures with the authorization of a public prosecutor.
Bank of Italy Communication
Following the publication of the Regulation in the Official Gazette, the Bank of Italy issued guidelines on its proper application.
It emphasized key points relevant to the functions exercised by the Bank, aiming to promote the application of MiCAR in a way that contributes to maintaining the regular operation of the payment and financial system.
As clarified in the Communication, the Bank of Italy will be responsible for:
- Prudential supervision regarding EMT and ART issuers (including market access) and CASP;
- Ensuring transparency, correct behavior, and protection of EMT holders, limited to EMT issuers;
- Supervising the anti-money laundering obligations of crypto-asset service providers;
- Monitoring the regular functioning of the payment system.
- Potential cryptocurrency holders should always be informed about the potential risks associated with them and about the obligations and rights associated with each specific token.
- The Communication also highlights that the specific characteristics of the various types of crypto-assets and enabling technologies, and their suitability for payment purposes, are crucial from the perspective of sound and prudent enterprise management.
- Anyone wishing to start activities governed by MiCAR must ensure full compliance with anti-money laundering and counter-terrorism financing provisions, also ensuring the adequacy of organizational and control structures.
Asset Segregation
Crypto-asset operators are required to implement an asset segregation regime. This means that client liquid funds and digital assets must be separated from the operators' assets in separate accounts.
Operators are prohibited from using clients' crypto-assets or funds for their own purposes. Client assets cannot be subject to actions by the operators' creditors. However, actions by individual clients' creditors are permitted, limited to the clients' holdings.
Sanctions
The Legislative Decree provides for various criminal and administrative sanctions for those providing crypto-asset services without adhering to MiCAR regulations. Depending on the type and severity of violations, sanctions will include:
- Abuse offense (introduced in Art. 30): punishable by imprisonment of 6 months to 4 years and a fine ranging from €2,066 to €10,329. This applies to anyone who offers asset-linked tokens to the public, provides cryptocurrency services, issues e-money tokens, or offers e-money tokens to the public without the necessary authorizations.
- Non-compliance with transparency, conflict of interest
management, marketing communications, continuous token-holder
information, and technical regulatory and implementation
standards:
- For legal entities, fines range from €30,000 to €5 million or up to 3% of total annual turnover for minor violations, and up to 12.5% of turnover for more serious ones;
- For individuals, fines range from €5,000 to €700,000.
- Insider trading and market manipulation violations: punishable with fines ranging from €5,000 to €5 million. These offenses include insider trading, unlawful disclosure of insider information, and market manipulation. The entity's liability for insider trading, unlawful disclosure of insider information, and market manipulation also applies to violations committed in its interest or benefit, with fines ranging from €30,000 to €15 million or up to 15% of total annual turnover.
- Failure to cooperate or comply with investigations: punishable with fines ranging from €30,000 to €5 million or up to 10% of total annual turnover for legal entities, and from €5,000 to €5 million for individuals. In cases of serious violations, additional measures may be imposed on cryptocurrency service providers, such as banning from exercising management functions for a period ranging from six months to three years. Administrative sanctions are imposed by the Bank of Italy and Consob according to their respective competences. The sanctioning authority will publish the sanction decision on its website.
Entities already registered with the OAM by December 27, 2024, that have applied for a MiCA license by June 30, 2024, may continue to provide their services under the previous regime until December 30, 2025, (or until license approval/rejection).
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.
