What we need to know about Crypto regulation in Italy
Italy is spearheading EU’s serious look into the realities of virtual reality via cryptocurrencies.
(July 17, 2020) — Italy is constantly in the news lately as it continues to reel from the rage of the coronavirus carnage. On the other hand, the Italian Government is getting its hands busy on the legislative table in a bid to regulate the domestic use of cryptocurrencies. The move for needed measures can be reflected on the following news headlines:
- Italians love Cash but are growing fond of Crypto new stats suggest (Bitcoin.com)
- Italian Bank offers Crypto trading to over A million customers amid coronavirus pandemic (Blockchain.news)
- Italy’s securities regulator shuts down 8 Crypto trading and Foreign Exchange sites (cointelegraph)
- 1.2 Million Italians can now buy Bitcoin from their bank (Bitcoin.com)
These news item samples can only mean that the Italian populace is gearing for a crypto mass adoption in the future. They are finding it more favorable to buy and sell virtual assets especially now that government guidelines to stop the spread of the virus include cashless payments, online transactions, and virtual services. Thanks to the COVID-19 Pandemic, crypto exchanges are now taking a foothold on the financial rhythm of Italians, including their companies and businesses.
Regulating the Unregulated.
But since cryptocurrencies operate on a decentralized character, most crypto creators self-regulate. And when crypto-friendly countries do have forms of regulation to protect its investing citizens, they differ from one another. Italy has already had pre-pandemic efforts for development, reconciliation, and solutions to make the use of crypto parallel to the incumbent fiat.
Difficulty Lies in Terms.
Having to come up yet with specific crypto regulations, Italian authorities have sought the EU’s position on crypto assets as a benchmark, to begin with.
A Ministerial Resolution of 2016 issued by the Agenzia delle Entrate (Revenue Agency) addressed certain aspects of the tax treatment of bitcoin and other cyber currencies. It implemented a European Court of Justice (ECJ) decision which held that no Value-added Tax (VAT) can be imposed on the exchanges of crypto to fiat and vice versa.
But “for purposes of the corporate income tax (Imposta sul Reddito sulle Società, IRES) and the Italian regional production tax (Imposta Regionale sulle Attività Produttive, IRAP), profits and losses on such transactions constitute corporate income or losses subject to taxation.” In short, all profits from crypto are taxable, except crypto transactions.
Looking into the Italian Legislative Decree no. 90 Series of 2017, regulations imposed on traditional money exchanges also apply to cryptocurrency exchanges, giving cryptocurrencies the same treatment with foreign currency.
If that be the case, then it goes against its definition of cryptocurrencies as, “a digital representation of value not issued by a central bank or public authority…”, since foreign currency is fiat and, therefore, is centralized and taxable. Another ambiguity is that assets kept in cryptowallets are not taxable since they are not foreign accounts. The bundling can really be that confusing. Be that as it may, the decree mandates a listing of firms who are into cryptocurrencies for purposes of commercial or professional use. It will ease tracing in cases of money laundering, terror financing, and other illicit activities.
On February 7, the Parlamento Italiano swiftly approved a bill submitted by the Senate last January 23 defining blockchain technology and distributed ledger technologies, or DLT. The crypto regulation bill to be known as “Decreto Semplificazioni” is now under the Agenzia per l’Italia Digitale tasked to create specific technical standards for the legal compliance of smart contracts.
Proof of Concept.
According to Statista, there are already 350 businesses in the retail and foodservice sectors who are accepting cryptocurrency payments, totaling 270 Italian retailers and 214 service providers for that matter. Economic powerhouse Northern Italy is responsible for more than half of the country’s economy and posts highest values of GDP per capita in all of Europe. Lombardy houses 149 stores that receive cryptocurrencies, or 18% of the total. Trentino-Alto Adige (South Tyrol) and Veneto are both hosts each to 12% of crypto-abled stores.
Italy accounts for 0.8% of the total global number of Bitcoin ATMS. Coinatmradar counts 17 Bitcoin ATMs spread throughout Italy with Bolzano having 5, Milan with 2, Florence 2, and Rome with 1. Meanwhile, Lombardy’s capital, Milan, has the highest number of cryptocurrency ATMs, followed by Bologna, the capital and largest city of another northern region, Emilia-Romagna.
Certainly, Italy has come a long way beyond proving itself the cryptocurrency hub of the EU. All it takes is putting an end to ambiguities via government regulation specifying cryptos. That can be a defining moment for Italy.