New Bitcoin AML/KYC regulation in Italy. Are crypto anonymous since July 2022 in Italy?

Italy before the Statutory Regulation

Italy is among the many nations in the European Union {EU} with unregulated crypto activities. As a result, Italy has not completely defined where cryptocurrency falls. Still, one thing is sure, cryptocurrencies or crypto-assets do not fall under the definition of a Financial Instrument as it was set out in MiFID II. Instead, cryptocurrencies or crypto assets are classified under financial assets. 

According to CONSOB, before a financial investment is seen as a Financial product, it must pass three tests:

{A} must deploy fund

{B} A return of financial return is ascertained

{C} investors must take risks directly involved in funds deployment, which bitcoin activities are not clear to have passed them. However, some experts believe that crypto is a financial investment.

The essence of putting statutory regulation on crypto activities is to prevent fraudulent activities in Italy, as bitcoin ATMs are one of the most common places where fraudsters carry out their act. Because bitcoin ATMs are not regulated, it is difficult for the government to track and monitor their transactions. Therefore, making their hiding places for fraudulent activities.

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Italy After the Passing of Statutory Regulation

As stated above, Bitcoin ATMs can be hiding places for money launderers because they are not regulated in Italy. However, although they are hiding places for money launderers, having KYC regulations will completely defy what decentralized exchange is – operations without interference from a third party, which in this case is the government regulation.

But since Bitcoin ATMs must operate in Italy, they must abide by the laws that bound financial products irrespective.

To regulate crypto activities in Italy, a decree was signed for exchange platforms, forcing them to devise safety measures for their users to prevent fraud on their platforms. However, it seemed as though the decree was insufficient; there was a need to implement another decree.

This bill was passed in April 2021 but was successfully signed by the Ministry of Economy and Finance {MEF} on January 13, 2022, and will be effective from May 18 effective to July 1, 2022 which is the initial date before unregistered exchange platforms will be sanctioned.

A NEW DATE HAS BEEN ANNOUNCED AND YOU HAVE A WEEK TO TWO WEEKS TO REGISTER ACCORDING TO THE NEW STATUTORY REGULATION

Exchange platforms that do not comply with the regulations will face applicable punishments. And this decree applies to all virtual assets, virtual assets producers, and digital wallet service providers.

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And the decree comes with requirements:

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1. Any in-scope company wishing to carry out crypto-related activities in Italy must register with OAM { Organismo per gli agentli mediatori}.

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• 1{A}. Any digital wallet service provider or virtual currency must register with OAM and follow all the requirements listed in Article 17 –bis, paragraph 2, of the Legislative Decree August 11, 2010,n, 141

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• 1{b} for companies that have not started their operations in Italy can wait to inform OAM of their operations in the country, communicate with OAM about the requirement of operations in Italy, and must meet them. And finally, they must wait for the OAM announcement before they commence operation in the country. 

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1. Any company wishing to carry out crypto-related activities in Italy must regularly send reports of the transactions on their platform, including the identification of its members. Some identification data they must send include:

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• First name
• Date of birth
• Tax code
• VAT number
• Residence
• And details of the identity documents

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What is The Cost of Not Complying With the Crypto Regulation in Italy?

If, after reading all the requirements needed to operate crypto-related activities in Italy, you do not register your company with OAM, you'll be getting a huge fine. The fine is not only for those who know they should register; it is for anybody {whether you're aware or not} who carries out crypto-related activities in the country.

For such companies, they will face applicable consequences according to Article 17 –bis, paragraph 2, of the Legislative Decree August 11, 2010,n, 141, which involves paying a fine of 2,065 to 10, 329.

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Why KYC May not be the best?

"Our freedoms are vanishing. If you do not get active to take a stand now against all that is wrong while we still can, then maybe one of your children may elect to do so in the future, when it will be far more riskier — and much, much harder.”

― Suzy Kassem

KYC regulations in Italy will certainly eliminate the privacy feature of decentralized exchange platform which is the fear of Bitcoin ATM owners. Another fear is that the regulations will open the door for the misuse of users’ data from security organizations and will eliminate preparedness in cases of emergencies. 

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