The Italian CONSOB has published a new report on crypto assets in which it proposes two new registers, one for crypto asset exchanges, and one for digital wallet service providers.
The new report is the final one related to the public consultation launched a few months ago and is the entity’s response to the legislator on the possible definition of new rules to regulate the launch and operation of ICOs.
The idea of a register for exchanges is not new, seeing that for example in South Korea and Japan it has already existed for some time, so this would only make Italy one of those countries which have already introduced it.
In addition to this, there is a very similar proposal to create a register for intermediaries who manage crypto assets on behalf of third parties.
The CONSOB consultation leading to today’s proposals was carried out on March 19th, 2019, while a public hearing was held on May 21st with more than 200 participants. The consultation ended on June 5th, 2019, with 61 responses received, with the final report being published today.
The report shows that the definition of crypto assets is not clear enough, due to the difficulty in distinguishing between those that can be classified as financial instruments and those that cannot be classified as such, to the extent that many of those involved in the consultation called for the introduction of more explicit criteria to determine this distinction.
The notion of “financial instrument” is in fact contained in the relevant European legislation (MiFID), which among other things requires national authorities to avoid regulatory changes in this respect. This category includes cryptocurrencies such as Bitcoin or Ethereum, which are considered only as means of payment and for which no further regulations are required beyond those already in place.
Another interesting definition is the one that, according to CONSOB, should differentiate the blockchain from the generic distributed ledger technology (DLT), understood as a broader category of which blockchain technology is part.
In light of the outcome of the consultation, CONSOB would consider it appropriate to adopt solutions that ensure both liquidity for investments in crypto assets and the reliability of exchange platforms.
For this reason, it considers it necessary to ensure that the token proposed to the market through an ICO is eligible for trading within an exchange system included in a special register kept by the CONSOB itself, or in a similar system based in a country other than Italy, provided that it is subject to a regulatory and supervisory regime in line with Italian law.
The same reasoning is applied to token custody services, defined as “digital wallet services”, in order to identify the requirements that such suppliers would have to meet in order to be included in another specific register kept by the CONSOB.
The latter are defined as services related to the custody and provision of access to crypto assets on behalf of third parties, also through the possession of private cryptographic keys, in order to hold, store and transfer crypto assets.
The objective of these proposals is to reduce risks, especially for retail investors, making them appear totally justified.
It now remains to be seen whether the Italian legislator will accept these suggestions.
