FinTechs belonging to this category offer financial services using crypto currencies. This category also includes FinTechs utilising blockchain and distributed ledger technologies (DLT) upon which Bitcoin and Ethereum are based, among others. FinTechs develop and do research in this field in order to create new services – e.g. crypto currency exchange markets, wallet providers, NFTs-related services, new payment services, "smart contracts" or new clearing and settling services.
Attitude of the country towards financial services using crypto currencies
Local regulators are still cautious as to financing transactions based on virtual currencies. As indeed highlighted by the Bank of Italy, 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).
Obligations and requirements to provide financial services using crypto currencies described above
Under Italian law, a 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.
Crypto currencies may have very different characteristics and serve different functions. In light of that, depending on the specific characteristics of the product, crypto currencies 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, crypto currencies 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 crypto currencies 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 2 September 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).
From 14 February 2022, a new regulation by the Ministry of Economic and Finance took effect, to set out registration and conduct requirements for providers in virtual currencies and e-wallet. This regulation tasked the OAM with the role of public register and governing body for those providers.
Additional comments regarding the legal situation for financial services using crypto currencies or what FinTech’s must be aware of in this business area
On 2 January 2020, CONSOB published its final report on Initial Coin Offering (ICOs Report), following a consultation with stakeholders held in 2019.
This Report raises awareness on opportunities and risks associated with ICOs, notably on anti-money laundering and fraud, and calls for a harmonised framework at the EU level.
Market size for financial services using crypto currencies and biggest companies in this business area
In Italy, the use of virtual currencies is relatively increasing among consumers and businesses. In this context, Bitcoin remains the most popular virtual coin among Italian users.
Additional comments regarding the economic situation for financial services using crypto currencies or what FinTech’s must be aware of in this business area
CONSOB is increasingly detecting, and thus banning, firms offering investment services based on virtual currencies without being duly licensed, according to its Annual Report.
Specifically, several cases of abusive activities were fined by CONSOB in relation to crypto currencies. To ensure effectiveness of such fines, CONSOB has adopted different means of enforcement, relating to the specific breach(es).