As part of the budget legislation for 2023, the Italian Senate authorised a new tax rate for cryptocurrency trade.
Encourage or dissuade the Bank of Italy’s various perspectives on the cryptocurrency issue?
The Bank of Italy has been debating for some time what steps to take as it searches for novel methods to use blockchain technology in accordance with EU legislation. Let’s examine the situation in further depth.
The steps being taken by the Bank of Italy regarding cryptocurrencies
Ignazio Visco, the bank governor, stated that the Bank of Italy is searching for new ways to adopt distributed ledger technology (DLT) and is getting ready for the arrival of the Markets in Crypto-Asset (MiCA) law on February 4.
According to Visco, DLT can provide advantages including lower cross-border transaction costs and improved financial system efficiency.
The Italian central bank is concentrating on figuring out how DLT might improve consumer safety and financial stability.
Visco stated a desire for laws that would divide the bitcoin market into very dangerous instruments and services that divert resources away from beneficial activities and the wellbeing of the entire community from those that actually benefit the economy.
In fact, he said:
The latter can expand by creating regulations and safeguards like to those currently planned for in the conventional financial system; the former, on the other hand, has to be firmly discouraged.
Moreover, Visco highlighted “crypto-assets without inherent value” as a subset of the first type. According to Visco, the Bank of Italy is trying to create technology and a standards framework at the European and international levels.
In order to start the “authorization and supervisory actions” of MiCA, it is also collaborating with CONSOB and the Ministry of Economics and Finance. Recently, Italy began taxing capital gains on cryptocurrency transactions worth more than 2,000 euros ($2,150).
But, starting on January 1st, Italian taxpayers will have the option of paying a 14% tax on their bitcoin holdings. This option aims to encourage taxpayers to disclose their digital assets.
According to Visco, just 2% of Italian families are considered to be crypto asset owners, and even then, the holdings are “often modest amounts.”
Italian cryptocurrency asset trading capital gains tax
dealing in cryptocurrencies for more than 2,000 euros, or $2.13, is subject to a 26% capital gains tax.
The Italian Senate passed the budget for 2023 on December 29, just days before the year came to a close. This budget contains a rise in taxation for bitcoin investors.
Crypto assets are defined by the law as digital representations of value or rights that may be electronically transferred and held using distributed ledger technology or comparable technologies.
Prior to this, the nation considered cryptocurrencies as foreign currency with lower taxes. The new law also provides that taxpayers will have the option to report the worth of their digital assets and pay a 14% tax beginning on January 1.
Italians are being offered incentives to divulge their digital holdings. Tax amnesties to cut penalties for late payments, tax breaks for job creation, and a lowered retirement age are some of the additional adjustments made under the budget bill.
Tax incentives of 21 billion euros ($22.4 billion) are also included for people and businesses dealing with the energy crisis.
The Markets in Crypto Assets (MiCA) bill, which established a uniform legal framework for cryptocurrencies in the 27 member nations of the European Union, was passed on October 10 and is followed by the Italian legislation. In contrast, MiCA is anticipated to go into effect in 2024.
The Bank of Italy adheres to EU cryptography regulations.
The EU pilot project for market infrastructure regulation is only one of the distributed ledger technology (DLT) projects that the Bank of Italy is currently working on.
Regulators in the European Union (EU) have established the procedures for requesting permission to run a financial market based on distributed ledger technology (DLT), clearing the way for a new pilot programme that is anticipated to start this month.
The technology behind cryptocurrencies, according to lawmakers on the group, might do away with middlemen in the trade of financial products like stocks, bonds, and other securities.
Nevertheless, given that they would need to evaluate the problem first, there have been questions over whether typical retail investors will be able to receive the advantages in practise.
The following is stated in the EU’s December advice about distributed ledger technology:
“The applicant should clearly indicate to the national competent authority for its assessment what the experiences are (e.g. through his education, training, experience professional, etc.) who demonstrate a sufficient level of knowledge of the operation of DLT technology,” states the National Competent Authority. “When the users of the platform are ordinary people, rather than, for example, an investment banker.”
In any event, there were worries that the challenge, especially if each EU nation handled it differently, may prove to be a disincentive to the adoption of DLT in comparison to current methods of accessing financial markets.
The European Securities and Markets Authority’s (ESMA) recommendations are not required, but national authorities must justify any deviation from them. ESMA advises applicants to push forward the official entrance into force of the advice even though they go into effect this month together with the rest of the rule amendments.
The new regime is essentially open to both current markets and fresh competitors. Firms representing investment businesses, trading platforms, and securities depositories submitted comments on the draught, according to ESMA.
Here is what transpired when Italy neglected to check the compliance of its crypto businesses.
In fact, the businesses were registered on a registry created to make sure they adhered to the nation’s anti-money laundering regulations. The “Organismo Agenti e Mediatori (OAM),” an Italian regulatory agency that keeps a registry of financial agents operating in the nation, including credit brokers and money changers, has been quite active.
Although authorities are sometimes accused by the sector for taking too long to process applications, Italy’s OAM, which only started its new list of virtual currency service providers in May, rapidly added 73 bitcoin firms to it.
Investors may tell that a firm has been thoroughly evaluated by the country’s responsible authorities by seeing if it receives regulatory approval or qualifies for registration with a local regulator.
The regulatory permission mentioned in these assertions, meanwhile, would not have the same security weight in Italy.
In actuality, no business has been screened before being added to the list, despite the fact that registration with the OAM is now required to continue functioning in the nation.
The OAM has acknowledged that it has not yet decided how to obtain pertinent data from businesses and won’t likely begin doing so until the following year.
This implies that the measures in place to stop criminals or bad individuals from utilising these sites to transport money are not currently being monitored by Italian regulators.