1. The Market in Crypto Assets Regulation
2. Current and new legislation in Italy
3. The relevant supervising authorities (Consob and Bank of Italy)
4. Asset segregation rules and sanctions
5. The transitional regime On 14 September 2024, Legislative Decree No. 129 came into force, bringing Italian regulations in line with MiCAR provisions. The measure grants to Consob and Bank of Italy supervisory and investigation powers for the protection of investors and the orderly functioning and integrity of cryptocurrency markets and for the stability of the financial system.
The Authorities’ powers are exercised in relation to the offer and issuance of asset-referenced tokens (ART), e-money tokens (EMT) and crypto-assets other than ART and EMT, as well as to crypto-asset service providers.
The latter (so-called CASPs) will be subject to an authorisation process as a result of which they will be able to benefit from the passport regime and provide services on a cross-border basis (a possibility that is now excluded). Provisions on asset segregation and asset resere for certain cryptocurrencies aim to provide greater protection for clients.
A detailed transitional regime allows for a gradual transition to the MiCAR provisions, ensuring that customers are adequately informed about the choice of CASPs to obtain authorisation or to cease their activities after 30 June 2025, with orderly termination of relationships 1.The Market in Crypto Assets Regulation
On 29 June 2023, Regulation (EU) 2023/1114 on markets in crypto assets (‘MiCAR’) came into force, which ‘lays down uniform requirements for the offer to the public and admission to trading on a trading platform of crypto-assets other than asset-referenced tokens and e-money tokens, of asset-referenced tokens and of e-money tokens, as well as requirements for crypto-asset service provider’ (Art. 1.1).
The MiCAR regulates, in particular, the issuance, trading and provision of services in relation to the aforementioned types of crypto-assets (defined as digital representation of a value or of a right that is able to be transferred and stored electronically using distributed ledger technology or similar technology):
(i) asset-referenced tokens (‘ART’): a type of crypto-asset that purports to maintain a stable value by referencing the value of one official currency;
(ii) electronic-money token (‘EMT’): a type of crypto-asset that aims to maintain a stable value by reference to the value of an official currency;
(iii) crypto-assets other than ART and EMT, a category that also includes, for example, utility tokens, defined as a type of crypto-asset intended solely to provide access to a good or service provided by its issuer.
Issuers and offerors of crypto assets must coordinate a number of activities with the competent authorities in their country, to which in particular must be notified the White Paper, the document on crypto assets containing information on the offeror and issuer, the project and the rights and obligations associated with the crypto asset, as well as the underlying technology and risks. The validity of the white paper is equal to the life of the token, so that the white paper might be amended during the period in which the tokens are in circulation.
Services for crypto-assets include, according to Art. 3.1. 16) of the MiCAR, a range of services similar to those provided for by MiFID II in relation to financial instruments; they range from the provision of custody and administration of crypto-assets on behalf of clients to the operation of a trading platform for crypto-assets; the execution of orders for crypto-assets on behalf of clients; the reception and transmission of orders for crypto-assets on behalf of clients; providing advice on crypto-assets; and providing portfolio management on crypto-assets.
The provision of services for crypto-assets is carried out on a professional basis by ‘crypto-asset service providers’ (or ‘CASPs’): they must also submit an application for authorisation to the competent authority of their home Member State, so that they can benefit from the so-called passport regime and thus operate on a cross-border basis in other EU countries. *
2.Current and new legislation in Italy
Until now, the provision of services in virtual currency in Italy did not require a specific authorisation but required enrolment with the register kept by the OAM (Organismo degli Agenti e Mediatori) for service providers relating to the use of virtual currency and for providers of digital portfolio services (so-called ‘VASPs’ - virtual assets service providers), who were not allowed to operate on a cross-border basis.
In order to bring the Italian regulations in line with the MiCAR provisions, on 5 September 2024, the relevant Legislative Decree No. 129 was approved (in force since 14 September), consisting of 48 articles and divided into six Titles (common provisions and definitions; competent national Authorities and cooperation between Authorities, also with reference to the issuance of tokens subject to MiCAR regulation; special provisions relating, for example, to the regulation of the crisis of token issuers; applicable sanctions; amendments and additions to the regulations of the specific sector with coordination provisions; transitional provisions and regime).
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3.The relevant supervising authorities (Consob and Bank of Italy)
As regards the competent Authorities, Italy identifies Consob and the Bank of Italy, also with generally separate and distinct supervisory and investigation powers between the two Authorities. In particular, Consob is competent for investor protection and the orderly functioning and integrity of cryptocurrency markets, and the Bank of Italy is competent for the stability of all or part of the financial system.
The Authorities are endowed with regulatory powers (Article 5 of the Legislative Decree), being able to issue implementing provisions of the Legislative Decree itself as well as of MiCAR, and can issue precautionary measures against EU entities, as well as intervene on products, and also cooperate with the National Cybersecurity Agency.
Within the scope of its tasks, Bank of Italy authorises the issuance, public offering and request for admission to trading by issuers of ARTs and EMTs, also exercising supervisory tasks. Consob is the competent authority in terms of supervision for cryptocurrencies other than ART and EMT, which do not require authorisation and are not subject to supervision.
As far as CASPs are concerned, authorisation is granted by Consob, subject to the opinion of the Bank of Italy, at the end of a process that requires the production of a substantial amount of documentation in addition to the possession, on the part of the CASPs' members of management bodies, of requirements of fit and proper, competence, and availability of time to carry out their duties. *
4.Asset segregation rules and sanctions
Further relevant provisions of the Legislative Decree, which adapt what has already been prescribed by MiCAR, are those relating to the segregation of the asset reserve with regard to ARTs: issuers, in fact, may not under any circumstances use, in their own interest or in the interest of third parties, the assets forming part of the asset reserve, except in highly liquid financial instruments with minimal market, credit and concentration risks. In addition, no actions by or in the interest of the ART issuer's creditors, nor those of the depositary's creditors, are permitted against the segregated assets; legal and judicial set-off are not allowed and no contractual set-off can be agreed with respect to the depositary's claims against the ART issuer.
CASPs are also subject to similar asset segregation provisions, for obvious client protection reasons. Actions by creditors of individual customers are allowed within the limits of the assets owned by the latter, and CASPs may not use for their own account the crypto-assets pertaining to customers, held by them in any capacity whatsoever.
The legislative decree introduces provisions for sanctions, both of criminal and pecuniary nature, even exceeding 10 per cent of the annual turnover, for the case of abuse in relation to the offer, provision of services and issuance of crypto-assets, as well as administrative sanctions for violations of regulations. Liability and sanctions are also identified for corporate officers and staff. *
5.The transitional regime
Particularly relevant are the provisions on the transitional regime: according to Article 143 of MiCAR, CASPs that will have provided their services in accordance with the applicable law before 30 December 2024 may continue to do so until 1 July 2026 or until the issuance or refusal of an authorisation under MiCAR, whichever is earlier. Member States may decide not to apply the transitional regime, or to shorten its duration, as it was decided by Italy, since under the legislative decree all VASPs duly registered in the OAM register as of 27 December 2024 which apply for authorisation by 30 June 2025 as CASPs, in Italy or in another Member State, may continue to operate pending the authorisation procedure, until the issuance or refusal of the same and in any case no later than 30 December 2025. Prior to this authorisation, however, they will not be able to operate on a cross-border basis.
Entities that do not intend to file an application as a CASP in Italy by 30 June 2025 will therefore have to cease their operations by that date and, consequently, terminate their existing contracts and return to their customers the crypto-assets and funds pertaining to the latter, in accordance with the instructions that will be provided by the customers themselves.
All entities registered in the VASP registry shall publish on their website and transmit to their customers adequate information about their plans and measures to comply with MiCAR, or for the orderly termination of the relationships, as soon as such plans and measures are defined and in any case no later than 31 May 2025, specifying that any activity carried out vis-à-vis customers pending the authorisation process or the termination of operations continues to be governed by the rules applicable to VASPs and is not subject to the MiCAR rules.
In these days the Italian Authorities have expressed their views on the legislative decree; Consob invites VASPs to plan early and sufficiently in advance all steps necessary to comply with MiCAR and to ensure maximum transparency to their clients and the public on the plans and measures they intend to undertake to start operating services in compliance with MiCAR, also drawing attention to the need to set up effective IT solutions, systems and procedures to prevent, detect and report possible cases of market abuse. Operators will have to ensure that personnel assigned to perform crypto-assets services meet appropriate knowledge, experience and competence requirements in such area.
In order to facilitate compliance with the new regulations, Consob is available to engage in preliminary discussions with interested parties, with the view of the future submission of applications for authorisation and notifications falling within its competence, also providing clarifications on the information and documentation to be attached to the applications, for the contents of the white paper, and for the operators interested in submitting applications for authorisation as CASP.
In order to facilitate an orderly start-up of the new regime, pending completion of the national regulations, the Bank of Italy is also available for informal discussions to guide those interested in the future start-up of operations.
CMS office, through its professionals, is available for clarifications on the regulations and the fulfilments necessary to submit applications for authorisation or other requests to the Authorities.
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