The Central Bank of San Marino recommends due diligence on cryptocurrencies

The Central Bank of the Republic of San Marino today published a precautionary statement concerning cryptocurrencies. 

This warning contains some information on the use of or investment in virtual currencies, in line with the approach adopted in other countries by the respective supervisory authorities. 

According to the CBSM, this warning specifically concerns “the risks arising from the use, investment or holding of virtual currencies, both for their users and for participants in the relevant market and service providers, as well as for financial intermediaries“. 

In particular, it advises those who decide to purchase virtual currencies to gain a better understanding of these assets and their characteristics before buying them. In other words, it recommends researching them well before venturing into this market, without actually discouraging investment in this area. 

As is often the case with high-risk investments in the financial sector, it recommends investing only what one is willing to lose. 

“Do not invest financial resources in virtual currencies for which you are unable to withstand the risk of loss. 

To make the message even clearer, the Central Bank explicitly invites potential users of virtual currencies to:

“carefully understand their characteristics and risks before investing financial resources in them or carrying out any transactions associated with them“. 

This approach, consisting of research and risk control, is commonly considered an excellent approach for this sector, which is still so young and has little history to learn from. 

Furthermore, the CBSM also points out that in the Republic of San Marino virtual currencies are legal, but are not subject to financial regulation and authorisation and supervision by the Central Bank, while also adding that these assets do not fall under the notion of currency or financial tool. As a result, there are no specific laws applicable to their use and possible investments. 

This can generate “cases of misconduct, sanctioned by criminal law in the San Marino legal system” with regard to the activity of issuing virtual currencies, converting legal currencies into virtual currencies and vice versa. 

Finally, it mentions, on the one hand, the intrinsic potential of virtual currencies, especially in terms of speed and efficiency in the execution of transactions and, on the other, the high volatility of their value, as well as other potential risk factors. 

The Republic of San Marino aims to become an international hub for companies working in the blockchain and distributed ledger sector, which is why it is in favour of the use of cryptocurrencies. 

The prudent approach of the CBSM, which invites the citizens of San Marino to inform themselves in order to avoid investing randomly, does not appear to be in contrast with these ambitions.