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Crypto Exchanges& Regulation in Italy

Top exchanges in Italy by Coincub criteria
Article review author
Jonathan Lea
Italy head image

Crypto Country Rating: 7/10

7.5/10
Institutional acceptance
Central Bank CBDC under ongoing analysis, low ICO numbers
6.5/10
Exchanges & Wallets availability
Leading exchanges available
7/10
Government regulation
Lowish tax on crypto but lack of cohesive crypto strategy overall
5/10
Defi acceptance
Not significant
6.5/10
Financial services
Growing start-up and blockchain community but lack of cohesion between institutions.
6.5/10
Transparency
Latest round of AML regulation and licensing effected
6.5/10
Spending crypto
Low - some state-owned services accept crypto
6.5/10
Banks activity in crypto
mainstream banks showing lack of

Introduction

Italy has high scores for important ranking categories such as numbers of Bitcoin nodes and ATMs, along with a high number of Blockchain-related enterprises. Crypto ownership as a percentage of the population is only average to low, as is the number of crypto transactions. What’s really needed to boost Italy’s crypto credentials is a clearer and more progressive strategy toward crypto as a whole, and this is what marks the higher-ranking countries apart.

At the moment, Italy is finalizing new anti-money laundering rules, aligning them with the EU’s fifth AML Directive. In this, it has a specific requirement for virtual asset services providers (VASPs) from other EU countries to have a registered and permanent presence in Italy before they can qualify as approved. Nevertheless, in 2019, a regulation on transactions using an Electronic and Distributed Database (DLT) was approved, making  Italy the first nation to implement the legal regulation of blockchain technologies.

Italy has been at the heart of an ongoing central bank digital currency exercise (the digital euro), analyzing the pros and cons of such a concept with the Bank of Italy publishing a report on its findings in 2021, subtitled ‘Markets, infrastructures, payment systems’. The report discussed how a digital currency could support a central bank in performing its functions based on the integration of both a traditional and DLT-based platform, enjoying the benefits of two complementary solutions. The findings of euro-area National Central Banks and the ECB concluded that such an integrated system as the one above could potentially provide a practical way forward for meeting both regulatory and retail users’ needs.

The wider banking sector as a whole has been slow to offer services to facilitate the growing crypto demand. At a higher level, there is still much debate over how exactly to classify cryptocurrency, with many leading institutions from law courts to financial regulatory bodies each having their own interpretations to bring to the party. This is something that doesn’t help strategy overall. That said, there are a growing number of Italian banks willing to undertake crypto services for their customers with the latest, and one of the largest, Banca Generali, now planning to allow customers to buy, sell and store Bitcoin in partnership with Conio, a specialized Fintech organization. Firmer AML laws and a crypto classification everyone can agree upon look to be on the way. There is also a burgeoning blockchain enterprise community that will surely push Italy up the rankings as crypto prices rise and more VASPs are registered

Tax on crypto

At present, there is no direct taxation policy for crypto gains, but gains made from speculative trading with the aim of making a profit will be subject to standard income tax reporting requirements.

In a well-known ruling, tax authorities reached the conclusion that cryptocurrencies are akin to foreign currency and the proceeds arising from speculative exchanges of cryptocurrency are subject to the standard rules applicable to income arising from trades of foreign fiat currencies. This is a 26% substitutive tax for Italian resident individuals and non-commercial organizations, and prevailing corporate income tax established entities.

Crypto tax generates much debate in Italy, some saying that it requires a different tax approach due to its volatility and potential complexity in being exchanged into flat currency. However, tax is payable is on the gain at the time of the sale (over costs of purchase) and Italian residents are exempt where their profit is under €51,0002 and where their profits don’t stem from business activities (there is some wriggle-room, however, according to whether the trade is deemed to be a foreign currency trade). That said, the 26% is still pretty reasonable in comparison with some high tax states in Europe.

Businesses that use or trade cryptocurrency are subject to prevailing corporate income tax, and companies are required to register their crypto operations including information on accounts, amounts, and transactions.

ICOS and start-ups

Initial Coin Offerings ICOs have had an uncertain run in Italy due mostly to the definition and understanding of cryptocurrency overall which varies across leading financial authorities and legal institutions, and the price volatility of such crypto-tokens when offered as ICOs.

 Thanks to this lack of direction, initial coin offerings need a degree of interpretation and case-by-case assessment – all due to the definitions mentioned above and aspects such as  ‘Is the ICO of a financial nature in itself or an offer of financial products?’ It seems likely that ICOs will become a part of the mainstream financial communities and have to provide a prospectus.   

 Because of this Italy has had a relatively slow start to its number of ICO start-ups, compared to other leading economies in Europe. However, this is beginning to change, and venture capital investment is growing rapidly with a high number of blockchain-related start-up companies offering services from security, business management, finance, and more. With so much pent-up activity many predict the Italian start-up company environment may experience a boom in 2022 with increased funding available.

Financial Community

Italian banks have not been overwhelming in their support of cryptocurrency to date, but the Central Bank of Italy has made optimistic and positive noises about the benefits of combining traditional and DLT-based financial platforms with the view that there are distinct savings and advantages to be had. CBDCs it stated, offer a store of value, therefore, being an asset with “unique characteristics,” free of credit and liquidity risks. While countrywide, there is no uniformity of position on cryptocurrency, that doesn’t make Italy unique by any means.

Mining

Italy isn’t one of the world’s mining hotspots, but the activity has experienced something of a renaissance in northern Italy, thanks to a number of Alpine hydroelectricity schemes providing the energy needed. What is termed ‘sustainable’ mining is performed in the turbine rooms of a number of formerly disused hydroelectricity utilities which have become active again. As with Iceland, a top-five mining country, concerns over the use of energy for mining are always part of the debate. Tax on mining is the same as for any commercial enterprise, as Italy still lacks a purpose-designed framework for cryptocurrency. Italian tax authorities currently apply the existing income tax and reporting rules to crypto mining activity.

Helpful?
FAQ

New to crypto? Here’s our guide!

FAQ Image #1 01 Why Bitcoin? It seems like the buzz around Bitcoin just keeps growing. Bitcoin is a constantly evolving technology with a passionate community. What is it about the digital asset that makes it such a controversial topic and attractive investment?
FAQ Image #2 02 How to Get Started with Bitcoin It can be difficult to get past the technical jargon surrounding bitcoin (BTC) and other cryptocurrencies in order to figure out how you can buy and store them. Beginners can purchase Bitcoin, for example, on many exchanges using fiat currency like U.S. Dollar, Euro or British Pound.
FAQ Image #3 03 Blockchains 101 Blockchains are a type of database where data is stored in blocks that are chained together. As new data comes in, it is entered into a block, which is then chained to the previous block. The Bitcoin blockchain serves as a ledger that records every Bitcoin transaction in history.
FAQ Image #4 04 Bitcoin in the Real World Ok - you’ve found an exchange, bought your Bitcoin, and stored it safely. What’s next? By now you can buy just about anything with Bitcoin if you try hard enough, from Amazon gift cards to an old master painting. You can also convert your BTC to fiat with ATMs, an exchange, and more.

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