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The Criminal Supreme Court of Italy recently made a groundbreaking ruling on the legal classification of crypto-assets, specifically examining whether they should be considered financial products.
The case in question involved the initial coin offering (ICO) for the creation of a decentralized platform that would provide logistics services through tokens, exchangeable for cryptocurrencies.
The Supreme Court of Italy acknowledged the “financialness” of activities involving crypto-assets, ultimately determining that the regulations and protections outlined in the Italian Consolidated Law on Finance (TUF) apply, particularly in the context of public offerings of financial products. This determination was based on the presence of elements such as the use of capital, assumption of risk, and promise of return. The latter element, in particular, was seen in the investor’s expectation of seeing the token revalued based on the success of the business venture.
However, the reconstruction made by the Supreme Court of Italy in the ruling should be interpreted in light of the guidance of the Italian banking authority, Consob, in its March 2019 discussion paper where it clarified that the appreciation of tokens linked to the outcome of the underlying initiative does not represent a return of a financial nature. Moreover, the Supreme Court of Italy cites as precedent Judgment No. 195/2017 of the Court of Verona, which established the qualification of a certain crypto-asset (i.e. Bitcoin) within the (different) category of “financial instruments”. This reference appears inconsistent since it would seem that the Supreme Court of Italy overlapped the concepts of product and financial instrument, which are instead very different from each other.
Yet, it’s worth noting that the Belgian regulatory authority, Autorité de Services et Marchés financiers (FSMA), has recently issued a statement clarifying that financial regulations should not apply to crypto-assets that do not represent a right vis-à-vis a particular issuer or entity, such as those created by computer protocols without an issuer-investor agreement.
The Supreme Court’s ruling could have significant implications for the regulation and oversight of crypto-assets in Italy, and will likely spark further debate and discussion on the financial nature of these digital assets. But, the aspect remains highly debated due to the elements of uncertainty around the ruling that we highlighted above.
On a similar topic, the following article may be of interest “Cryptocurrency and NFT seizure: here’s how it’s possible in Italy”.