New Proposal For Crypto Regulation in Italy: Analysis, Opinions, Context

The Italian Ministry of Economics is working on a decree that aims to classify the use of cryptocurrencies in the country and to list “service providers related to digital currencies.”

Cointelegraph analyzed the draft of the document that aims to introduce new regulations on the use of cryptocurrencies in Italy and talked about the new decree with local business, political, and academic representatives.

2018 – year of regulations

2018 could be a very peculiar year for the crypto industry: the year of regulations. From East to West, regulators from all over the world are working on new laws for the crypto industry.

We have seen a hard-line and prohibitionist approach from China, that aims to heavily control the phenomenon, but also a more reasonable approach from the US, Japan and Switzerland, whose purpose is to create a solid foundation for the development of the industry in the future.

Member of the innovation board of the Ca’ Foscari University and the Ascotrade innovation hub, Renzo Taffarello commented on why regulations are developing in 2018:

“These decrees are made in this historical period because 1) we saw the increase in value of Bitcoin which led to large increases of “assets” associated with Bitcoin, 2) the occurrence of numerous ICOs that see capitalized Start Up, 3) the fact that the use of Bitcoins is entering the traditional economy. 4) finally, the hypothesis that the cryptocurrencies can be used for illicit purposes since they are outside the national jurisdictions.”

In this disarray of laws, decrees and confused statements there’s also Italy. The Ministry of Economy and Finance, in the Press Release N°22 released on Feb. 2, stated its commitment to “understand the cryptocurrency phenomenon in Italy in all its aspects.”

Mayor of Montegrotto Terme, a city in northern Italy, Riccardo Mortandello, told Cointelegraph:

“Many compare the phenomenon of cryptocurrencies to other recent speculative bubbles. But, in my view, there is a substantial error: cryptocurrencies are a clear response of the “system” to the moment of supposed overcoming the traditional banking model that in too many cases is no longer aligned with the technologies. But, above all, is no longer aligned with the real needs of people.”

Crypto phenomenon regulation

As announced on their official website, the Treasury Department of the Ministry of Economy and Finance is working on a decree that aims to explain the crypto-phenomenon in Italy. In particular, the decree will define how and when “service providers related to the use of digital currency” should report their activities to the Ministry.

The decree aims to avoid any unlawful activity that could be conducted with cryptocurrencies, most importantly money laundering. However, compliance with anti-money laundering laws when acting with cryptocurrencies on a professional level was already clarified on May 25, 2017, in the Legislative Decree № 90.

The definition of “virtual currency” is explained in the decree as: “digital representation of value, not issued by a central bank or a public authority, not necessarily related to a fiat currency, used as a tool of exchange for purchasing goods or services, and electronically transferred, stored and traded.”

Michele Orzan, digital leader (Europe) of the World Economic Forum and president of EuCham (European Chamber), proposes to remove the phrase ‘not issued by a central bank or a public authority’ from the definition of virtual currency, “as various states are about to issue them, and some have already done so.”

The new administrative order, available for public consultation up to Feb. 16, 2018, proposed clear ways for reporting crypto activities to the Ministry of Economy and Finance, as well as a potential timeline.

“Service providers related to the use of digital currency”

Who are these “service providers related to the use of digital currency” exactly? As stated in the draft of the decree, it’s any individual or entity that provides professional services, related to cryptocurrencies, such as using, trading, storing or converting.

Therefore, any seller who accepts cryptocurrencies as a means of payment for goods, services, or other purposes is required to report their activities to the Ministry, within the time frame and in accordance with the format established by the decree.

If one is already operational within the Italian border when this decree comes into effect, he will have to report his activities to the Ministry within 60 days of effective date of the ministerial order.

List of the crypto actors

According to the decree, professionals of the industry are required to register on a special list kept by the Institution of Agents and Mediators (OAM  – Organismo degli Agenti e dei Mediatori), which manages lists of financial and credit organizations.

Following the effective date of this regulation, in order to report the activities to the Ministry and register to the list, one will have to fill out a form, as seen on the draft of the decree, and send it using a special Italian certified email service (PEC).

The form requires general identification data such as name, surname, document data, as well as the address or the website of the business.

The official decree will be eventually published in the Gazzetta Ufficiale della Repubblica Italiana (Official Gazette of the Italian Republic).

After the release of the updated decree on the government gazette, those who operate with cryptocurrencies at a commercial or professional level in Italy, including sellers who accept digital currencies as means of payment, must send a certified email to the Ministry of Economy and Finance.

With this information, the government will have a better understanding of the phenomenon and be able to conduct potential inquiries in cases of money laundering or other illegal activities.

However, Michele Orzan is not so convinced by the listing initiative: “While certainly, I appreciate the desire to understand the phenomenon (which however could be carried out by a few research companies certainly better and faster), it could end up with the usual Italian flaw: a further bureaucratic request.

Moreover, it is useless to ask commercial operators whether they accept or intend to accept virtual currencies: in a few years, all or almost all commercial operators will accept virtual currencies.

Finally, paradoxically, it seems as if it’s happening in the previous century: to send forms by certified mail to the state, attach a copy of the document issued by the state itself. In 2018 it makes me smile: it’s as if being in bed with my wife, before …er, partying … I would ask her to show the copy of my signature that I have affixed to the marriage act myself. You never know …”

What will the government do with this data?

As clearly stated in the draft of the decree, the data gathered by the Ministry, other than being used for the census, will be made available to the Financial Police (Guardia di Finanza) as well as to the Postal and Communications Police, i.e. Italian Cyber Police (Polizia Postale e delle Comunicazioni), in order to conduct investigations related to money laundering schemes and the funding of terrorism.

Renzo Taffarello, expert on internationalization and innovation strategies, specializing in digital platforms and related technologies, commented: “What do the new proposals do? They define the obligation for those who manage cryptocurrency to register on special lists. Basically, people who are financial intermediaries or merchants or others will have to present themselves and inform whether they are part of crypto exchange. It is evident that the government is putting a series of obligations that are the prerequisites for future decrees and regulations of a fiscal nature.”

Michele Orzan proposes an alternative way of finding out who is engaged in crypto activity:

“Unburden businesses, do not weigh them down with further requests. Given that soon there will be a declaration of income [in Italy], it would be enough to add a small square, ask the question, and tick it (this would cover the majority of companies and individuals who engage in business). In the EU there are cutting-edge countries, such as Estonia: one should learn from the best.”

Towards more regulation?

The new proposal highlights the growing interest of the Italian government in regulating cryptocurrencies.

Francesco Nazari Fusetti, social entrepreneur, founder of AidCoin and CharityStars, is enthusiastic about the new developments:

“Regulators are moving faster than expected all over the world. Surprisingly, Italy is also taking the crypto phenomenon seriously. For Italian businesses, I believe it’s positive to have guidelines to be able to operate legitimately in this new industry.”

The decree doesn’t introduce new taxes or unusual laws: it just asks sellers and operators in the industry to send a report to the Ministry in order to conduct a census of the activities and tackle potential criminals.

Renzo Taffarello, however, thinks that the decree will give way to further regulations:

“What can be expected – typically, the Italian government in tax matters has a very bureaucratic approach associated with rules that are particularly difficult to interpret. This could turn into a barrier to the adoption of cryptocurrencies unlike what is happening in other countries in Northern Europe and the world.”

For legal businesses, the new decree does not entail any particular sacrifice or burden, so it shouldn’t constitute an obstacle towards the adoption of cryptocurrencies.

Regarding criminal activities, which are particularly damaging for the industry, the new decree offers law enforcement agents new tools to fight illegal operations.

Riccardo Mortandello, mayor of Montegrotto Terme, sums up:

“If the phenomenon of cryptocurrencies will not run out due to some circumstances, it will be particularly interesting to understand its impact on the current economy. Moreover, it is interesting to study how to govern and regulate this phenomenon, which, if not managed properly, could put in danger the existing instruments of monetary policy. While centralization, in the common imaginary, aims at achieving quality of life objectives, the cryptocurrencies instead point to decentralization, which, although obviating the known limits of the centralized, could implicate further problems. A phenomenon that politics must govern even before the bureaucrats or large corporations worldwide.”

The interviews were conducted in collaboration with Cointelegraph managing editor, Lucrezia Cornèr.