Cryptocurrencies service providers: new regulatory requirements to operate in Italy following the set up of the Special Section of the OAM register

The new Decree of the Ministry of Economy and Finance (MEF) of January 13, 2022, published in the Official Gazette no. 40 of 17-02-2022 (hereinafter the "Decree"), imposes on cryptocurrency and digital wallet service providers who operate or intend to operate in the Italian territory the compulsory enrollment in a special section of the register held by the “Organismo per gli agenti e mediatori”, i.e., the Agents and Credit Brokers Body (hereinafter the “Special Section”), a now-mandatory requirement to operate in Italy. Essential requirement for the enrolment of companies is to have legal and administrative office in Italy while, for EU companies, a branch in Italy is sufficient.

Therefore, non-Italian players are no longer allowed to operate in Italy on a cross-border basis.

The new regulation applies to:

• Cryptocurrency service providers: i.e., both physical and legal persons who, on a professional basis, provide third parties, also online, with services relating to the use, exchange, storage of virtual currencies and its exchange from or into legal tender currencies or into digital representations of value, including those convertible into other virtual currencies, as well as the services of issuing, offering, transferring and clearing and any other service relating to the acquisition, negotiation or intermediation in the exchange of the same currencies;
• Digital wallet service providers: i.e., any natural person or legal person who provides third parties, on a professional basis, including online, with services for the safeguarding of private cryptographic keys on behalf of their clients, to hold, store and transfer virtual currencies.

The regulation, therefore, concerns all the platforms that are used to offer to third parties, on a professional basis, services related to cryptocurrencies, with the exception of issuers of virtual currency activity who do not qualify as crypto currency service providers to the extent such activity is not carried out on a professional basis and on behalf of third parties.

In accordance with the provisions introduced by article 17-bis, paragraph 8-ter of Legislative Decree no. 141 of August 13, 2010, the Decree establishes the procedures and timeframe by which cryptocurrencies service providers and digital wallet service providers must communicate their activity within the Italian territory to the OAM.

The requirements and fulfilments provided for under the new Decree are additional to those provided for under the AML Decree (legislative decree no. 231/2007), to which the above providers are already subject.
 
1. The MEF Decree on cryptocurrencies service providers

With the new Decree the activity concerning the use of virtual currency and digital wallet services in Italy is now subject to the compulsory registration in the Special Section of the OAM register, which will be set up within 90 days from the entry into force of the Decree. According to the OAM the Special Section will be set up by 18^th May 2022.

Art. 3, paragraph 2, of the Decree allows the registration in the Special Section only for operators who meet the conditions set out by article 17-bis, paragraph 2, of the Legislative Decree 141/2010, which are, for entities other than individuals, “having a legal and administrative office or, for EU entities, permanent organization in the territory of the Republic”.

Therefore, legal persons having their legal seat in another EU country will be able to register in the Special Section and operate lawfully in Italy only if they have a branch in Italy.  Non-EU operators will necessarily have to set up a subsidiary in Italy.

For the purposes of registration in the Special Section of the OAM register, operators intending to carry out their activities in Italy must send an electronic communication to the OAM containing the data indicated in Article 3(4) of the same Decree.

Cryptocurrencies and digital wallet service providers which already operate in Italy  must send the above communication within 60 days of the establishment of the Special Section and may continue to operate pending the registration process only if at the date of such establishment of the special section they meet the requirements set out under article 17-bis, par.2 of Legislative Decree 141/2010 (i.e., they have a legal seat or a permanent establishment in Italy), under penalty of being charged for unlawful exercise of activities in the territory of Italy.
 
As a consequence, foreign cryptocurrencies and digital wallet service providers already operating in the Italian territory, in the absence of a legal seat or permanent establishment in Italy upon starting of the Special Section, will have to suspend their activity because it is abusive, until they have provided for the establishment of a company or subsidiary and obtained registration.
 
For Italian operators who already provide virtual currencies and digital wallet services, instead, it will be sufficient to send the communication within 60 days of the constitution of the Special Section of the register.
 
After verifying the correctness and completeness of the information submitted, the OAM within 15 days will proceed (or not) with the registration in the Special Section. This term may be suspended once for a period not exceeding 10 days if the documentation is deemed incomplete and/or integrations are necessary. If the provider does not file the required integrations within 10 days after OAM notification, the communication shall be considered as not received and the OAM will deny the registration.
The enrolment in the OAM register triggers new reporting requirements for cryptocurrencies and digital wallet service providers which supplement those already required for AML purposes. Art. 5 of the Decree provides that crypto operators will have to notify electronically to the OAM the data relating to the transactions taking place in the Italian territory and, notably:

• the identification data of the customer as identified in Annex 1 of the Decree;
• the summary data relating to the activity for each customer, as identified in the same Annex 1 of the Decree.

 
2. Sanctions

The lack of prior registration in the Special Section by cryptocurrencies and digital wallet service providers intending to operate in Italy implies the abusive exercise of their activity and is punished, pursuant to art. 17-bis, paragraph 5, Legislative Decree 141/2010, with an administrative fine imposed by the Ministry of Economy and Finance from 2,065 to 10,329 euros. In addition, where the competent authorities ascertain that services relating to the use of virtual currency and/or digital wallet services have been unlawfully carried out in Italy, they may ascertain and contest the violation in accordance with the provisions of Law No. 689/1981, which could lead, inter alia, in the case of activities carried out through websites, to the seizure of the same by means of obscuring and prohibiting access to them.
 
3. Conclusions

The regulatory framework set out in the new MEF Decree is part of the legislative measures aimed at preventing money laundering and terrorism financing to ensure a more effective monitoring of the activities taking place in Italy. The enrolment in the OAM register, now necessary to operate in Italy, as well as the new reporting requirements for operators in virtual currencies and digital wallet, will increase the controls already in place in such field, turning the spotlight on the activities of Italian and foreign cryptocurrencies operators who, now, will have to necessarily comply with the relevant obligations.