As part of our ongoing expert series on global crypto legal regimes, we analyze and evaluate different regulatory approaches for digital assets. This article covers Italy’s transition to the EU’s MiCA regulation, where the new rules represent a brand-new and long-awaited regime for the governance of digital assets.
As the implementation date for MiCA approaches at the end of 2024, each EU member state is required to set up a process for crypto-asset service providers (CASPs) to undergo the appropriate notification or licensing requirements within the defined transition period.
Introducing MiCA – Farewell to a grey area
Although the Italian government issued legislation in 2019 and again in 2023, it’s unfortunately brought little clarity for CASPs. The 2019 decree only provided broad clarity over the functions of digital currencies while failing to offer any concrete definitions.
The Italian government subsequently decided not to implement any further regulations, while the Central Bank and others continued to warn of the dangers of digital assets while maintaining interest in the potential use cases of blockchain and DLT. Thus, digital asset operators have been in somewhat of a gray area prior to the implementation of MiCA.
In 2023, the government passed new laws designed to pave the way for MiCA. Since January 2023, operators have been required to register for AML purposes with Organismo Agenti e Mediatori (Register of Financial Agents and Credit Mediators.) As such, using or trading cryptocurrencies is not unlawful so long as service providers are registered with OAM.
As of mid-2024, there are nearly 150 companies registered for crypto-asset activities with OAM. The operators are almost exclusively crypto-native firms, with a presence that includes major operators such as Coinbase, Kraken, Bitstamp, Binance, and others.
Registration with OAM will allow providers to benefit from transitional arrangements as the new MiCA regulations are being implemented in Italy.
Overview of MiCA transition and timeline
On 30th August 2024, the Italian government passed a draft decree for the implementation of MiCA into Italian legislation. It delegates responsibility for the regulation of CASPs between the Bank of Italy (Banco di Italia) and the Securities and Exchange Commission (Commissione Nazionale Per le Societá e la Borsa, or CONSOB). The two bodies will be jointly responsible for the licensing and supervision of CASPs; however, applications will be handled via CONSOB, confirmed in a communication from the regulator on 12th September.
The existing Italian rules require all providers to undertake an OAM registration without distinction. Thus, a bank launching crypto-asset services in Italy has been subject to the same registration requirements as a brand-new crypto exchange operator.
However, MiCA exempts “certain financial entities” from the requirement to obtain a CASP license from their domestic regulator under the provisions of Article 60. Entities such as regulated credit institutions, securities depositories, investment firms, and others already licensed or regulated under established EU financial regulations will effectively be permitted to extend their existing license to digital assets by following a simple notification procedure.
The notification procedure only requires that the qualifying entity notify the competent authority at least 40 days in advance of providing that service for the first time.
Notification procedure
The 12th September communication from CONSOB provides preliminary information for operators about the transition to MiCA; however, this communication did not issue any specific instructions regarding the notification procedure. Even so, MiCA makes this requirement straightforward, so qualifying institutions can assume the route to CASP operation will be relatively smooth and unimpeded.
Since MiCA only takes effect from 30th December 2024, a qualifying entity must notify CONSOB by the latest 20th November 2024 to begin providing services under the new rules on 31st December 2024.
Licensing for new CASPs
Non-qualifying CASPs must undergo the procedure to obtain a license to provide services to Italian users once MiCA comes into effect at the end of December. According to the CONSOB September communication, applications are now open to potential CASPs, and interested parties can make a preliminary pro forma application. The communication also provides some initial guidance regarding the requirements for obtaining a license.
Transitional arrangements for registered CASPs
It’s worth noting that registering with CONSOB using the procedure for new CASPs above does not allow any existing CASP to benefit from transitional arrangements under MiCA. CONSOB has clarified that only CASPs registered with OAM as of 27th December 2024 can benefit from transitional arrangements, meaning they can continue to operate, serving Italian users until 30th June 2025. By that time, they must have submitted a CASP application. CONSOB has until the end of 2025 to approve all applications.
Existing OAM-registered CASPs that do not submit an application by 30th June 2025 must cease operations by that date.
Once in place, the MiCA license is portable across all 27 EU states. However, until the license is granted, the ongoing approval to operate during the transition period only applies to CASPs serving Italian users. Therefore, there’s an incentive to apply early and obtain the license as soon as possible to access the entire EU market.
Italian banks to tap into new market potential
Having operated in a regulatory gray area for many years, MiCA brings much-needed clarity to the Italian digital asset markets, paving the way for entry by banks and other regulated financial institutions that may qualify for the simplified notification procedure under MiCA.
This lack of regulatory clarity is likely to have been a significant deterrent to institutional digital asset participation. However, it has not necessarily had the same effect on the Italian public, who have demonstrated a significant appetite for cryptocurrencies. In July 2024, CONSOB published data that indicated the percentage of Italians investing in cryptocurrencies more than doubled from 8% to 18% between 2022 and 2024. According to a 2023 survey by Coinbase, Italian respondents demonstrated the highest level of awareness of cryptocurrencies in comparison to 16 other countries. Given the high level of interest, Italy represents a potentially significant market opportunity for CASPs seeking to exploit the benefits of regulatory certainty.
Launching a MiCA-compliant CASP offering with Wyden
Wyden Infinity covers the entire end-to-end trade lifecycle of digital assets across all pre-trade, trade, and post-trade use cases. It enables sell-side firms to build and maintain retail and institutional client offerings as well as internal prop-trading needs via a single platform, making Wyden Infinity the ideal choice for banks and brokers when building and scaling their fully MiCA-compliant digital asset businesses.
A key advantage of the Wyden platform is that it offers true best execution through market-wide connectivity to over 55 trading venues and a smart order routing system that carries out price comparisons and order splitting to achieve the optimal execution terms. Transparency is built into the system via real-time pre- and post-trade data, and Wyden’s standalone accounting system offers a fully auditable transaction trail.
Integration with custody partners, such as Copper, Metaco, and Fireblocks, also means Wyden maintains an auditable record of transaction flows between custody and trading with automated liquidity management solutions that ensure an uninterrupted trading experience. Core banking integrations ensure smooth reconciliation and support the assimilation of a new digital asset offering into established workflows.
Contact us today for an initial discussion about implementing a MiCA-compliant digital asset offering in your organization.
Please note that the above article does not constitute legal advice.