Local regulators are cautious as to financing transactions based on virtual currencies. As indeed highlighted under a Bank of Italy’s 2019 Occasional Paper, virtual currencies are not to be used in order to finance ICOs, due to their volatility, the price uncertainty and the impossibility for the regulator to fully supervise them. There is also regulatory pressure for firms dealing with virtual currencies to comply with anti-money laundering rules, as long as those firms are able to convert virtual currencies into state legal tender (and vice versa).
Under Italian law, the only statutory definition of virtual currencies can be found in the anti-money laundering legislation, which defines virtual currency as “digital representation of value, not issued by a central bank or a public authority, not necessarily linked to a fiat currency, used as a means of exchange for the purchase of goods and services, and transferred, stored and negotiated electronically” (Article 1, Paragraph 2, Point qq of Italian Legislative Decree no. 90 of May 25, 2017, which extended some of the anti-money laundering obligations to providers of services relating to the use of virtual currencies). In this regard, the Financial Information Office of the Bank of Italy recently warned operators subject to anti-money laundering obligations against the suspicious operations carried through virtual currencies and specified, on a non-exhaustive basis, operations in virtual currencies that operators should be particularly careful about.
Cryptocurrencies may have very different characteristics and serve different functions. In light of that, depending on the specific characteristics of the product, cryptocurrencies could be considered by competent authorities as financial products (or, in some specific circumstances, as securities), which are regulated products. In such cases the selling and/or offer of, or advice towards - among others, cryptocurrencies could be carried out only by entities or persons duly authorized by and enrolled with the competent authorities. This was confirmed by CONSOB, which in many recent decisions blocked the offering to the public of cryptocurrencies because the offering was carried out in breach of the statutory and regulatory framework applicable to financial products.
On the other hand, from a tax point of view, the Italian Tax Agency (Agenzia delle Entrate) issued Resolution 72/E of September 2, 2016 on the fiscal regime applicable to companies providing virtual currencies services. According to this resolution and in accordance with the case law of the European Court of Justice (C – 264/14 of September 22, 2015), the operations in bitcoin are exempted from VAT. In addition, recently the Italian Tax Agency clarified its position regarding the tax regime applicable to utility tokens (see Resolution no. 72/ E).
In Italy, the use of virtual currencies is relatively increasing amongst consumers and businesses. In this context, Bitcoin remains the most popular virtual coin among Italian users. Noteworthy, in Italy there are 42 Bitcoin ATM points according to publicly available sources.
Given the social and economic implications of virtual currencies and assets, specific regulations of this field are expected going forward. For instance, an amendment of the Italian anti-money laundering legislation is due in light of the V AML (UE) Directive 2018/843, which extended the anti-money laundering obligations also to “custodian wallet providers“, i.e. entities providing services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies. Additionally, in March 2019 CONSOB published a discussion paper seeking for stakeholders’ view on among others regulation of Initial Coin Offerings (ICOs).
CONSOB is increasingly detecting, and thus banning, firms offering investment services based on virtual currencies without being duly licensed, according to its 2018 Annual Report.
Specifically, 22 cases of abusive activities were fined by CONSOB in relation to cryptocurrencies. To ensure effectiveness of such fines, CONSOB has adopted different means of enforcement, relating to the specific breach(es).