Implementation of the MiCA Regulation in Italy

The implementation of the European MiCA Regulation marks a significant shift in the regulatory landscape for virtual asset service providers (VASPs) across the EU.?

In Italy, the Legislative Decree № 129 of? September 5, 2024 (MiCA Decree), and the Consob’s Communication № 1/24 of September 12, 2024 lay out key moments of MiCA implementation in the country.?

MiCA Decree assigns critical responsibilities to the Commissione Nazionale per le Società e la Borsa (Consob) and the Bank of Italy, designating them as the primary national authorities for overseeing compliance with MiCA’s provisions.?

MiCA Decree also establishes processes for the issuance and public offering of asset-linked tokens, imposes new disclosure requirements for market participants, and introduces new sanctions and liabilities for entities in breach of MiCA provisions.

Changes for Italy Under MiCA

1. Requirements for authorization

The transition to MiCA introduces significantly higher regulatory standards for CASPs in Italy compared to the existing framework. Key requirements include:

• Corporate structure: CASPs must be established as joint stock companies, limited liability companies or cooperative companies.
• Management body standards: the members of the CASP’s management body must satisfy the same proper requirements applicable to the members of the management body of Italian banks.
• Shareholder requirements: any person owning a qualifying shareholding in an Italian CASP must satisfy the same good standing, honorability, and competency requirements as those applicable to the relevant shareholders of Italian investment firms.
• Financial reporting: CASPs are required to draft financial statements in accordance with IAS/IFRS, appoint an external auditor, and comply with Italian whistleblowing rules.
• Asset segregation: MiCA mandates a segregation regime, requiring CASPs to keep client crypto-assets and funds separate from the operator's own assets, as well as from other clients' assets. This ensures that client funds cannot be used by CASPs for their own purposes and are protected from creditors’ claims.

2. CASPs authorization process

Under MiCA, anyone wishing to operate as a CASP in Italy must fully comply with AML and? CFT provisions. Applicants must also ensure that their organizational and control structures are adequate to meet regulatory standards.

The process to obtain CASP authorization is as follows:

• Application submission. Applications for CASP authorization must be submitted to the Consob. The Consob will review the application in consultation with the Bank of Italy before granting or denying authorization.
• Notifications for financial institutions. Investment firms, banks, asset managers, and other financial institutions seeking to provide crypto-asset services under MiCA must notify either Consob or the Bank of Italy, depending on the specific services they intend to offer.
• Pre-submission consultation. The Consob and the Bank of Italy encourage entities interested in issuing asset-referenced tokens (ARTs) or e-money tokens (EMTs) to consult with the authorities well in advance of submitting their formal applications.

3. Transition period for companies in Italy

The MiCA Decree introduces a transitional regime for VASPs registered with Organismo Agenti e Mediatori (OAM) as of December 27, 2024.

VASPs must apply for MiCA authorization as a CASP by June 30, 2025. They can continue operating under the current regime until December 30, 2025 or until their application is approved or denied.

If VASPs do not apply by the deadline, they must cease operations in Italy and will be removed from the OAM register.

VASPs also must inform clients by May 31, 2025 about their compliance plans or the closure of operations.

4. Liability for violations under the MiCA Regulation

The MiCA Decree establishes a range of criminal and administrative sanctions for CASPs that fail to comply with its regulations. The severity of the penalties depends on the nature and seriousness of the violation. Key sanctions include:

• Abuse offense (Article 30):??

- imprisonment - 6 months to 4 years;??

- fines - €2,066 to €10,329.??

This applies to anyone offering ARTs, providing crypto services, issuing EMTs, or offering such tokens to the public without the necessary authorization.

• Non-compliance with regulatory standards (e.g., transparency, conflict of interest, marketing, and technical standards):??

- for legal entities -? fines from €30,000 to €5 million for minor violations, or up to 12.5% of annual turnover for more serious violations;

- for individuals - fines range from €5,000 to €700,000.

• Insider trading and market manipulation:

- for individuals - fines from €5,000 to €5 million;?

- entity liability - fines from €30,000 to €15 million or up to 15% of total annual turnover for violations in the entity's interest (e.g., insider trading, unlawful disclosure of insider information, market manipulation).

• Failure to cooperate with investigations:??

- for legal entities - fines ranging from €30,000 to €5 million or up to 10% of annual turnover;

- for individuals - fines from €5,000 to €5 million.

• Additional measures for serious violations:?

CASPs may face a ban from management functions for a period of 6 months to 3 years.

Administrative sanctions will be imposed by the Consob and the Bank of Italy according to their respective responsibilities. Sanction decisions will be published on the relevant authority's website.

The Consob Recommendations for MiCA Compliance

In its September 12, 2024 communication, the Consob provided essential recommendations for VASPs and other operators intending to offer crypto-asset services under MiCA. These recommendations focus on ensuring proper adaptation to MiCA's regulatory framework and maintaining transparency and best practices.?

Key points include:

• Organizational and procedural safeguards. Operators are advised to adopt organizational and procedural safeguards, including robust internal controls, to comply with the MiCA requirements to act honestly and professionally, prioritizing the best interests of customers and potential crypto-asset holders.
• Market abuse prevention. The Consob stresses the importance of implementing systems and procedures to prevent, identify, and report potential market abuse.?
• Clear customer communication. Operators must provide clear, accurate, and complete information to potential customers about the services offered, the crypto-assets involved, and any related marketing communications. This is crucial for ensuring that customers can make informed decisions.
• Competence and Experience of Personnel. The Consob highlights that personnel involved in providing crypto-asset services must have the appropriate knowledge, competence, and experience to perform their roles effectively. Additionally, operators should have procedures in place to identify and manage conflicts of interest, especially considering the complexity of crypto-asset services.

Conclusion

The implementation of MiCA in Italy represents a significant step toward a unified and robust regulatory framework for crypto-assets across the EU.?

With the MiCA Decree entering into force, Italy has taken proactive measures to ensure that CASPs and other market participants comply with stringent regulatory standards aimed at enhancing market integrity, protecting consumers, and preventing financial crimes such as money laundering and terrorism financing.

Ultimately, the full implementation of MiCA in Italy aims to create a secure and trustworthy environment for crypto-asset activities.

With strong regulatory oversight from the Consob and the Bank of Italy, the new regime sets the stage for a more transparent, compliant, and sustainable crypto-asset market in Italy and across the EU.

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