It outlines the following:

• The Bank of Italy is the competent authority for prudential supervision of electronic money token (EMT) and asset-referenced token (ART) issuers and cryptoasset service providers (CASPs). With respect to CASPs, the Bank of Italy is also the supervisory authority in respect of anti-money laundering/counter-terrorism financing (AML/CTF).
• The Italian financial market authority, CONSOB (Commissione Nazionale per le Società e la Borsa), is  the competent authority for overseeing cryptoassets other than EMTs and ARTs and for transparency, fair conduct, orderly trading and protection of customers in relation to ARTs and cryptoasset services. It also has supervisory powers in relation to the prevention and prohibition of market abuse involving cryptoassets.
• A transitional regime from the current domestic virtual asset service provider

VASPs currently operating in Italy and enrolled in the Organismo per la gestione degli Elenchi degli Agenti in attività finanziaria e dei Mediatori creditizi (OAM) register should take into account the transitional regime provided by the MiCAR Italian Decree and take the necessary steps to apply for a CASP licence (either in Italy or in another EU member state) by 30 June 2025.

See our article for more on this development.

The public consultations, available here and here (in Italian only), will be open until 22 March 2024.

See also: Crypto news: Italy launches two public consultations on draft decrees on MICAR and TFR

The statement tells audit firms and statutory auditors to conduct, in compliance with the requirements of the standard on internal quality control (ISQC Italia 1), an "appropriate risk assessment before accepting an engagement with a new client and when deciding whether to continue an existing audit engagement, or other assurance engagements and related services, relating to companies - including their subsidiaries and parent companies - that manage exchange platforms and/or perform activities concerning issuance, brokerage, lending or deposit of cryptoassets and/or provide other services in this sector." 

CONSOB said that given the high money laundering risk associated with activities and services involving cryptoassets, audit firms and statutory auditors should "pay particular attention to the assessment of the money laundering risk which is inherent to audit, assurance and related services engagementsn with clients operating in this sector".

In case of high money laundering risk, audit firms and statutory auditors "must apply enhanced due diligence measures, performing, both at the time of the engagement acceptance and during the provision of services, more in-depth, accurate and/or frequent controls, including accounting tests, in order to detect any suspicious money laundering activities." 

In order to operate in Italy, VASPs will now need to communicate their business to the Organismo per la gestione degli elenchi degli Agenti in attività finanziaria e dei Mediatori creditizi (OAM) and enroll in a dedicated section of the register of money exchangers kept by OAM.

The main recommendations concern:

• FinTech and digital payments: fostering the developments of blockchain technology applied to payments in Italy would have a significant positive economic impact on the market and allow Italy to become an important hub at a global level in this industry.
• AML: the AML legal framework requires intermediaries to conduct AML checks vis-à-vis customers, including KYC. In this context, the blockchain technology may be used to trace and record the KYC carried out by an intermediary in order for other market operators to take advantage of such identification. The use of the blockchain would thus drastically reduce the time and cost to comply with KYC obligations.
  In this regard, the adoption of Self Sovereign Identity (SSI) solutions would also have a significant impact. Additional benefits may arise if the application of simplified customer due diligence measures were to be allowed under the applicable AML legal framework for cryptoasset exchange transactions below a certain threshold. The thresholds currently provided with respect to e-money products may be used also in this case.
• Initial coin offering and security token offering (ICO/STO): the lack of a harmonised framework at an EU level on this causes uncertainty and concerns among market players. To avoid any negative consequences for Italy in terms of international competition, both ICO/STO definitions should be clarified, ensuring a widely offering of them in the market. The recommendations also suggest providing a definition of utility and security token. Please also see our previous newsflash. 
• Cryptoassets: the Italian AML legal framework provides a definition and regulation of virtual currencies which differs with respect to the provisions set out under Directive (EU) 2018/843 (so-called 5AMLD). It would be necessary to align the Italian legal framework as well as to introduce a distinction between custodian and non-custodian wallet providers. Finally, the Ministry of Economy and Finance is still to enact the long awaited decree setting out the registration requirements for virtual currency services providers in a dedicated section of the OAM register. The draft of the mentioned decree published under consultation in February 2018 should be reviewed accordingly and the requirements applicable to merchants accepting virtual currency as remuneration for their goods or services set out therein should be deleted. 
• Central bank digital currency (CBDC): Italy may promote vis-à-vis the European Central Bank the development of a CBDC. The relevant recommendation highlights many positive aspects of the CBDC including, among other things: (i) reduction of the costs of cash management; (ii) facilitation of access to banking services to people who normally do not have it through the use of blockchain; (iii) increase of digital money as well as smart contracts, resulting in greater use of electronic payments.

 The consultation ends on 20 July 2020.

Among others, the agreement provides for the planning of periodic educational projects reserved to the staff of both institutions as well as to special research projects of training partnerships, aimed at the study of economic and financial events also with regard to the risks connected with the spread of cryptocurrencies.

The FIU Director noted, first of all, that the development of FinTech business models requires a new regulatory approach aimed at preventing risks without jeopardising innovation.

In terms of risk mitigation, the FIU noted that, according to the draft law, a broader list of entities operating in virtual currencies will be subject to Italian AML rules.

More specifically, custodian wallet providers and entities providing services related to the issuance, offer, transfer and settlement as well as any other service related to the acquisition, trading and intermediation of virtual currencies will be included in the scope of the Italian AML rules, in addition to the exchangers.

Those entities will be subject to the Italian AML legal framework even if operating online.

This new provision would therefore capture also providers established in other countries but offering their services into Italy via distance communication means only.

Entities subject to AML rules will need to adopt specific internal procedures to comply with new obligations, including KYC requirements.

More details on obligations to be complied with will be set out under the final version of the law as well as the secondary implementing measures that will be enacted.

Along these lines, the FIU suggested that new reporting obligations should be imposed on all entities providing financial/banking/payment services and operating in Italy online, even if they do not have any physical presence in Italy.

This would, on the one hand, mitigate potential AML risks and, on the other hand, level the playing field by reducing the competitive disadvantages of domestic entities.