What is the applicable EU legislation?
With reference to EU law, on April 20, 2023, the European Parliament has approved the final text of the Markets in Crypto-assets Regulation (MiCA) legislation, which will enter into force between 2024 and 2025 and it will apply directly across the EU without any need for national implementation laws.
First of all, MiCA makes a distinction between cryptocurrency and tokens.
MiCA regulates the issuance and negotiations of crypto-assets, establishes requirements for crypto-asset issuers and service providers to provide complete and transparent information about the crypto-asset that they issue which shall be compliant with security and anti-money laundering measures, aims at guaranteeing consumer protection and the prevention of market abuses, such as market manipulation, bringing crypto-assets service providers within the scope of anti-money laundering regulations.
What are the main crypto-assets covered by MiCA?
It should be noted that MiCA is addressed to: the issuers of crypto-assets, crypto-assets service providers and any person admitted to trading on a trading platform for crypto-assets.
It covers crypto-assets that use decentralized ledger technology (DLT). In particular:
1) Asset reference tokens (ARTs): e., crypto-assets that aim to maintain a stable value by referring to the value of fiat currencies. They use non-cash assets or a basket of currencies as an underlying asset that supports the price. One example of ARTs is Digix, which is considered as an equivalent of stored physical gold;
2) Electronic money tokens (EMT): they differ from ARTs because they use a single currency as an underlying asset that supports the price;
3) Crypto-assets other than ARTs and EMT: utility tokens, which provide digital access to a good or service and may only be accepted by the issuer of that token.
However, there are certain cryptoassets which are regulated under MiCA, such NFTs and Decentralized Finance (DeFi).
What are the main strengths of MiCA regulation?
MiCA aims at regulating several unresolved issues regarding the crypto world and to create a uniform legal framework for crypto-assets markets in the EU. The main goal is to provide better consumer protection in order to safeguard against market manipulation and financial crime and to support innovation by guaranteeing transparency, prevention of risks and the prevention of assets. In particular, MiCA will regulate the transparency, disclosure, authorization and supervision of transactions. Consumer will have access to more information regarding risks, costs and charges related to the transaction.
MiCA will regulate a strict system of traceability in order to trace cryptocurrency transactions with the same accuracy of traditional transactions. It will also provide for the possibility of blocking suspicious transactions.
The prevention of money-laundering and financial crime will consist in the creation of a public register for non-compliant crypto assets service providers that operate in the EU without being authorized kept by the European Securities and Markets Authority (ESMA). Service providers will also be required to collect information regarding the senders and receivers of transactions regardless of their amount.
It is also directed at mitigating the environmental impact of cryptocurrency and reducing their high-carbon footprints. The process of mining cryptocurrency requires high-powered equipment consuming large amounts of energy coming from fossil fuels (e.g., coal) and also a high number of electronic wastes.
In light of the EU legislative framework analyzed above, national laws, with particular regard to the Italian and the Monegasque one, will be examined below.
What is the applicable Italian law?
As briefly anticipated above, the cryptocurrency’s world is not regulated in detail by national laws, in fact, considering such regulatory vacuum, one of the main goals of MiCA is to bring clarity among the EU Member States.
With regard to Italian law, the definition of cryptocurrency is provided under article 1, paragraph 2, letter qq) of Legislative Decree no. 90 of May 25, 2017, specifically:
“Cryptocurrency is the digital representation of value, not issued by a central bank or public authority, not necessarily linked to a legal currency, used as a mean of exchange for the purchase of goods and services and which is electronically transferred, stored and traded.”
The great news regards the provision by the 2023 Italian Budget Law of a unitary tax discipline concerning cryptocurrency.
In addition, it should be noted that on May 8, 2023, the so-called “Cryptocurrency Decree” has been definitively approved.
Such decree is applicable to crypto-assets that use decentralized ledger technology (DLT) and it establishes:
- The creation of a specific Registry related to the circulation of cryptocurrencies;
- In particular, crypto-assets issuers and intermediaries will be obliged to register all the relevant transaction with such Registry, with sanctions up to 5 million euros in case of default. The issuance of new crypto-assets and their transfers shall always be registered;
- The creation of such registry aims at simplifying the crypto-assets’ transfers by guaranteeing the traceability of transactions. Specifically, the crypto-assets’ issuers and intermediaries (including brokers and exchange platforms) are obliged to register such transactions and all the authorized brokers and exchanged platforms shall have a branch in Italy and shall be registered with the Registry of Cryptocurrency Operators, kept by OAM (e., Body for the management of Financial Agents and Credit Brokers’ Lists);
- The Registry shall be kept by the so-called Registry Manager;
- The crypto-assets’ issuers and the authorized intermediaries are also obliged to communicate the occurred registration of a new transaction to CONSOB (e., National Commission for Companies and the Stock Exchange);
- The relevant controls on cryptocurrencies’ transaction will be carried out by Consob and the Bank of Italy.
However, despite the important steps made with the approval of such Decree, the issuance of an operative agreement by CONSOB (i.e., Italian National Commission for Companies and the Stock Exchange) is needed in order to implement it.
Italy is not the only country, which is making progress in the regulation of cryptocurrency, in fact, in this respect, the relevant Monegasque law should be considered and analyzed.
What is the applicable Monegasque legislation?
In this regard, it is important to underline that the new legislation (Law no. 1528 of July 7, 2022, i.e., “Digital Provisions and Regulating the Activities of Service Providers on Digital Assets or Crypto-Assets”) shined a light on the crypto-assets services operating in Monaco by defining them as regulated activities subject to specific regulatory requirements. Such services include, inter alia, the exchange of virtual assets against other virtual assets, the operation of a negotiation platform for virtual assets, etc.
In Monaco, such activities may be carried out only if a specific license is previously obtained. A specific Commission of the Ministry of State checks if the relevant requirements have been fulfilled, in particular, the company shall be registered in Monaco and shall be compliant with AML national laws. The entities, which need to have a license, shall perform, inter alia, the following activities: issuance of crypto-assets, deposit or administration of crypto-assets or access to crypto-assets, operation of a negotiating platform for sale and purchase of crypto-assets, exchange of digital assets with other digital assets or with legal currency. It should be noted that yacht brokers do not fall within the scope of the abovementioned new law.
Such law also establishes the legal regime of the Initial Coin Offerings (“ICOs”) for public offers made in order to raise funds. In relation to ICOs, crypto-assets present some serious risks and disadvantages, such as the volatility risk, the lack of guarantee and the risk of fraud or money laundering. Therefore, the Monaco Commission de Contrôle des Activités Financières (“CCAF”) warned users of the specific risks and recommended them to check on the reputation of the ICOs’ organizer, have knowledge on crypto-assets and their risks, ensure their custody and their liquidity.
In light of the above, the EU and EU Members States are seeking to keep up with the continuing evolution of cryptocurrency, trying to ensure the best protection for users.
 DeFi is a new financial service provider that relies on automated protocols.