Cryptocurrencies, regulators ready to change pace: the moves of Italy, the US, the United Kingdom


The sector of cryptocurrencies he is facing a very special moment.

On the one hand, the increase in the value of the main tokens (bitcoin by over 20% and Ethereum by about 40%), probably deriving from some recent news: the recognition of bitcoin as legal currency by El Salvador, support for NFT from Facebook, the return of the miners after the ban on China, the tweets of the histrionic Elon Musk.

On the other hand, we are witnessing an ever greater attention of regulators to the phenomenon, with a “change of pace” compared to previous interventions. In 2017, period of Initial Coin Offeringin fact, many market control authorities had intervened by moving within the boundaries of current legislation (in particular those relating to the financial sector, such as the US Securities Law, for the SEC, or the various MIFID II / MIFIR directives, the PRIIPs Regulation, for the corresponding European authorities), considering the provisions already in place to be sufficient and promoting, as the Italian Consob did, proposals for “light” adjustment on the model of regulatory sandboxes.

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Recently, however, this approach seems to have changed, especially in the Anglo-Saxon world, and also in consideration of the new developments in the sector – Decentralized Finance, NFT, trading platforms, custodian services, and derivative products on cryptocurrencies – more emphasis is being placed. on the need for ad hoc legislation.

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United States: Gary Gensler’s speech

Last August 3 the head of the SEC, Gary Gensler, gave a significant speech at the Aspen Security Forum.

The chairman of the US Markets Control Commission, in addition to having worked for Goldman Sachs and being an assistant to the Secretary of the Treasury, taught at the MIT Sloan School of Management, with a course of his own on blockchain technology and cryptocurrencies. Also for this reason his words have a particular meaning and are taken into consideration in Congress, without forgetting that, as leader of the SEC, he has the possibility of giving direction to the actions of the supervisory authority.

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In his speech Gensler emphasized the role of investor protection carried out by the commission, which is flanked by that of facilitating capital investment and maintaining order, efficiency and fairness in the markets. In this context, the emphasis was placed on the lack of adequate investor protection in the cryptocurrency sector, which he literally compared to the “Wild West”.

Precisely with the aim of greater protection of investors, Gensler recalled how the SEC has intervened several times (without losing a case) to prevent the unauthorized offer of tokens similar to financial instruments, this within the powers assigned to it by current regulations.

But the most relevant novelty of Gensler’s speech concerns the focus on exchange and trading platforms cryptocurrencies, also in reference to those based on the paradigm of DeFi (Decentralized Finance).

In fact, from 2017 to today, the sector has seen the birth new actors and new methods and services. In particular, while in previous years the attention of the regulators (and of the legislator with reference to the anti-money laundering discipline) was more directed towards the so-called exchanges and the subjects that issued cryptographic tokens offering them to the public, today the emerging phenomenon of DeFi begins to cause greater concern, however, posing, in the opinion of the writer, greater legislative policy challenges than previous initiatives.

Trying to simplify a service, DeFi is characterized by the provision by some subjects of one platform on which anyone can create smart contract whose purposes are the most disparate: ranging from the automatic “exchange” of cryptocurrencies according to rates that fluctuate according to the supply / demand and the reference with the major cryptocurrencies traded on the market, to the currency loan, to the medium / long-term deposit (with perceived interest).

Obviously, as highlighted by the chairman of the SEC, these are cases that fall not only within the financial sector, but involve aspects of banking law and consumer protection.

Furthermore, according to Gensler, the number of so-called “stable coin“(For a current value of 113 billion dollars), ie cryptocurrencies whose value is linked to that of a legal currency in order to calm the volatility of the markets, which are often used for trading between cryptocurrencies (in July three- quarters of trades across all trading platforms involved stablecoins).

Another point of attention underlined in the speech concerns cryptocurrency custody services (which often also involve financial advisory services).

At the end of his speech, the chairman specified that while the rules for establishing when a cryptocurrency can be considered a financial instrument and the related applicable regulations are clear, there are regulatory gaps with reference to the activities of trading platforms and DeFi, calling for collection the regulators to establish clear provisions in these areas, which are today governed by the meeting of a series of rules with ample room for interpretation.

UK: the moves of the FCA and the MiCA regulation

In parallel in Great Britain the control authority (FCA) gave some rumblings to cryptocurrency services.

In October 2020, the FCA had placed a ban on selling cryptocurrency-based exchange-traded products (ETPs) to retail investors, placing a warning in the provision as follows: “If consumers invest in these types of products, they should be prepared to lose all their money “.

In June 2021, with another notice to investors, the British authority stated that the UK operating branch Binance Markets Limited “is not authorized to engage in any regulated activity in the UK”, thus declaring one of the largest exchange platforms in the world “outlawed” in Great Britain (soon after the failure of Binance’s initiative to set up a subsidiary in the UK).

As a result of this measure, the British banks prevented their customers from making money transfers to and from Binance, substantially also preventing withdrawals from cryptocurrency accounts attested on the platform.

It is important to note that the British Financial Conduct Authority has recently carried out a series of research aimed at better understanding the profile of investors and the level of risk perceived by them in the purchase and use of cryptocurrencies.

As also emerges from the recent warnings issued on Kim Kardiashan West’s Instagram posts with which a cryptocurrency was promoted, certainly the British authority is one of the most dynamic and attentive, promoting even important requests to the Basel Committee, such as the introduction of a obligation to set aside a capital necessary to cover 100% of losses for banks that decide to hold cryptocurrencies.

The interventions of the English authority must be interpreted with extreme care, also taking into account Brexit and the fact that the European Union promoted the cd in September 2020. Digital Finance Package, which contains the proposed regulation Not (Markets in Crypto-Assets).

As is known, with this provision, the Union intends to promote a unified framework in all member countries, allowing persons who are authorized in one state to be able to carry out the activity in others without having to obtain new authorizations.

It `s important to note that the regulation does not provide for a discipline for security tokens, ie those similar to financial instruments, but introduces rules aimed at regulating “utility tokens”, “asset-referenced tokens” (ie those linked to other values, such as legal currency, goods or cryptocurrencies) and “e-money token “(ie stablecoins linked to a current currency).

The “Crypto-asset Service Provider (CASP) ”that is, those subjects that professionally provide services related to cryptocurrencies such as custody and administration, trading platforms, exchanges (in any form), placement, consultancy.

The exercise of these activities will be subjected to specific authorization procedures, different according to the type of token issued and the service to be performed, and new supervisory powers will be conferred on the supervisory authorities as well as sanctions aimed at preventing market abuse.

The provision, net of any changes that may be necessary following the outcome of the consultations and the approval process, should enter into force in 2024.

The European approach seems to be exactly the one recalled by Gensler in his speech, in which he intervenes in order to eliminate those regulatory “gray areas” with a view to favoring the development of new services in the cryptocurrency sector while simultaneously giving investors confidence. , thanks to a series of checks and legal certainties.

Great Britain, for its part, having placed itself outside the European forum, will probably have to act quickly to fill any gap, otherwise risking losing attractiveness for operators.

Italy: the start of the regulatory sandbox

In our country, starting from September 2021, calls will be launched for those who want to access the new fintech sandbox, governed by the decree of the Ministry of Finance no. 100 of 30 April 2021, published in the Official Gazette of 2 July 2021.

In referring to our more in-depth analysis on the pages of this magazine, we limit ourselves to observing that the sandbox mechanism seems to be the most suitable for regulating activities based on new technologies. The sandbox, in fact, has the purpose of allowing entrepreneurs to place new services on the market without having to fully apply the rules of the markets to which they belong (which in the FinTech sector are very stringent), but at the same time allows the regulatory authorities to to have greater awareness of the limits (and any gaps) of the current legislation (and it is for this reason that the decree of the Ministry of Finance provides for the possibility for the Supervisory Authorities to propose regulatory interventions to the appropriate FinTech Committee to adapt the current legislation on new phenomena).

All this while safeguarding the interests of the public, given that the activities of the subjects admitted to the sandbox are in any case carried out under the supervision of the relevant Authorities.

From this point of view, the approach adopted by Italy (which is certainly not the first country to introduce this mechanism) is certainly most suitable than that requested by Gensler, in which only the introduction of new rules for the new phenomena of the cryptocurrency sector is urged. The sandbox allows, in fact, the flexibility of regulation that appears more suitable in a sector that is constantly evolving and changing and in which excessive regulatory rigidity could act as an obstacle to the creation of innovative services that can fully exploit the opportunities offered by these new ones. technologies.

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