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Companies and projects have increasingly relied on the sale of digital assets, or tokens, as a means of fundraising. These tokens generally do not grant the holders an ownership interest in the issuing company or project, but may provide governance rights, access rights or other utility. This has been conducted through public sales known as initial coin offerings (ICOs), proliferation through token generation events (TGEs) or private sales, among other mechanisms. While showing characteristics of traditional methods of fundraising, there are a range of unanswered questions related to the legal classifications of such products. As ICOs and TGEs will usually be distributed online and internationally, there is usually no single legal framework applying to such transaction, and the legal framework of each market in which the tokens may be offered or sold needs to be considered.
Introduction
Attitude of the country towards ICOs/token sales
In May 2023, legislative provisions were enacted to transpose the EU MiCA Regulation, on crypto-assets service providers, and the EU so called “Pilot Regime”, to amend the TUF and CONSOB’s regulations relating to the carrying out of investment services on security tokens and, broadly, by using the DLT.
The local market is therefore readier than in the past, although some concerns have been raised by COSNOB specifically, in relation to un-regulated ICOs.
Local regulators are indeed still cautious as to financing transactions based on virtual currencies. As highlighted by the Bank of Italy, virtual currencies should not 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, provided that those firms are able to convert.
Also, some recent cases of local platforms becoming insolvent, as well as news of US-based crypto-asset infrastructures going bust in 2023, might have affected the risk perception of Italian investors towards these assets.
Legal affairs
Presence of any explicit regulation on ICOs and the issuance of token/coins
Tokens/coins issued through an ICO may have very different characteristics and serve different functions. Considering that, depending on the specific characteristics of the product, tokens and coins 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, tokens and coins 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 tokens because the offering was carried out in breach of the statutory and regulatory framework applicable to financial products.
Presence of any explicit restrictions on ICOs or the issuance, distribution and/or transfer of token/coins