Italy to introduce tougher crypto asset regulations in new decree

According to a draft decree released on Thursday, Italy plans to introduce stricter rules to manage the risks associated with crypto markets. The surveillance aims to prevent and punish insider trading, market manipulation, and unlawful information disclosure.

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Regulatory breaches can incur fines of 5,000 to over 5 million Euros, depending on the extent. The penalties are part of the increased oversight in crypto markets amid regulations by central banks against crypto asset risks.

Italy’s decree to deal with cryptocurrency risks

These new policies are designed to comply with the EU’s crypto regulation framework, MiCA (European Union’s Market in Crypto Assets). Italy’s financial regulators have been laying out the groundwork for an environment to introduce these policies since early last year. 

According to the central bank’s governor, Ignazio Visco, in a speech in February last year, cryptocurrencies need proper regulations. That decision came despite a survey showing that only around 2% of Italians hold a modest amount of crypto. Notably, only a few institutional companies are venturing into crypto investments.

“As I have already pointed out in the past, the risks associated with the very high volatility in the crypto-asset markets highlight the need for an appropriate set of rules and checks to prevent this sector from developing uncontrollably.”

Ignazio Visco, Governor of the Bank of Italy

The governor mentioned the uncertainty that surrounded the market in 2022 after the crypto market collapsed and several companies went bankrupt. He noted that “improper risk management and fraudulent conduct” contributed to this plunge.

As such, Italy plans to take note of cryptocurrencies and services with little to no intrinsic value. Such digital assets present high risk and divert resources from productive endeavors, reducing collective financial well-being. The new regulation is expected to discourage the growth of such digital assets.

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Ignazio notes that making this distinction will help financial authorities retain crypto-assets and services with “tangible benefits to the economy.” These advantages include lowering cross-border payment costs and improving financial system efficiency.

There is also a need for increased sanctions, as global crime reports indicate over $24.2 billion was received in illegal crypto addresses in 2023. The 2024 Chainalysis report sheds light on crypto crime trends, revealing that stablecoins are becoming more popular in illicit transactions. As part of MiCA’s strategy, the regulations will cover stablecoins.

Local bodies to govern crypto-assets

Like Italy, many European countries are on the path to implementing the MiCA framework. One notable decision is selecting local authorities (National Competent Authorities) to oversee crypto markets. Consob, a financial watchdog, and the Italian Central Bank will handle this task in Italy. Their purpose is to ensure the markets function in a stable and orderly manner.

“In close contact with CONSOB and the Ministry of Economy and Finance, we have also begun the processes for the authorization and supervision activities envisaged in the Markets in Crypto-Assets Regulation (MiCAR).”

Ignazio Visco, Governor of the Bank of Italy

So far, the country set up a mandatory registration for crypto companies operating within Italy, including exchanges and digital wallet service providers; there are approximately 150 enrolled on the register.

Likewise, these bodies will overlook technological innovation and implementation. More specifically, they will explore options for how Distributed Ledger Technology (DLT) can streamline insurance, payment and financial systems, and banking. 

As such, the Bank of Italy encouraged any institution exploring these options to put proper mitigation measures in place to minimize the risks associated with DLT and digital assets.

Cryptopolitan reporting by Collins J. Okoth