Consob Communication no. 1/24 of 12 September 2024

Initial implementation of the new regulations on crypto-assets - Preliminary pointers for operators

Adaptation to the MiCAR

At national level, at its meeting on 30 August 2024, the Council of Ministers approved the draft legislative decree for the adaptation of Italian legislation to the provisions of Regulation (EU) 2023/1114 on markets in crypto-assets (hereinafter also the “MiCAR”), which outlines the powers and functions of Consob and the Bank of Italy pursuant to Art. 93 of the MiCAR, in line with the European Delegation Law 2022-2023.

Allocations of competences to Consob

The aforementioned draft legislative decree, in identifying the distribution between Consob and the Bank of Italy[1], allocates to Consob, inter alia, responsibility for:

a) receiving notifications of white papers in relation to the offer to the public and admission to trading of crypto-assets other than ART and EMT[2] and monitoring the content of such white papers. Consob does not approve such documents and communications, but may require them to be amended;

b) issuing the Bank of Italy with a memorandum of understanding on aspects pertaining to the authorisation of the issuance, offer to the public and application for admission to trading of ART by the specialised issuers, as well as the approval of the white papers, and any amendments thereto, for ART issued by banks and class 1 investment firms[3];

c) receiving notifications of the start of the provision of services for crypto-assets from central securities depositories, investment firms other than class 1 and operators of regulated markets[4];

d) authorising, after consultation with the Bank of Italy, CASPs to provide crypto-assets services[5];

e) supervising transparency, probity and the protection of holders of crypto-assets, including marketing communications[6], the orderly conducting of negotiations and market integrity, as well as compliance with the provisions relating to market abuse with regard to crypto-assets;

f) exercising the supervisory and investigative powers referred to in Art. 94 of the MiCAR to fulfil the tasks provided for by the same Regulation, including the power to counter abusive initiatives involving the offer of crypto-assets other than ART and EMT without notification of the white paper and the provision of services for crypto-assets without authorisation.

MiCAR and application time frames

The MiCAR, which came into force on 29 June 2023, defines the new European regulatory framework aimed at promoting innovation while ensuring financial stability, investor protection and the integrity of crypto-asset markets[7].

In particular, the MiCAR regulates the issuance, negotiation and provision of services on three types of crypto-assets: i) asset-referenced tokens ("ART"), defined as crypto-assets which aim to stabilise their value by referencing another value or right, or combination thereof, including one or several official currencies; ii) electronic money tokens (e-money token – "EMT"), defined as crypto-assets that purport to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies; and iii) "other than" crypto-assets, a category that includes crypto-assets other than ART and EMT; this category also includes "utility tokens", i.e. crypto-assets that are only intended to provide access to a good or a service supplied by its issuer, and fractions of non-fungible tokens, for example those issued in a large series or collection. The MiCAR does not apply to crypto-assets that can be classified as financial instruments or as other products already regulated within the Union[8].

From 30 June 2024, Titles III and IV of the MiCAR will apply, which regulate the offer to the public and the admission to trading of ART and EMT.

In particular, the aforementioned Titles III and IV of the MiCAR reserve, respectively:

• the issuance, offer to the public and application for admission to trading of ARTs to specialised entities, subject to an authorisation and supervision regime, as well as to banks and class 1 SIMs, subject to notification obligations to the competent national authority and authorisation for the publication of the white paper;
• the issuance, offering to the public and application for admission to trading of EMTs to banks and electronic money institutions (“EMI”), with notification obligations to the competent national authority.

From 30 December 2024, the MiCAR will also apply to the following areas:

• offer to the public and admission to trading of crypto-assets other than ARTs or EMTs, subject to white paper notification obligations by issuers to the competent national authority (Title II)[9];
• provision of services for crypto-assets by entities specifically authorised pursuant to the Regulation[10] (crypto-asset service providers – "CASP") or by supervised financial intermediaries that have notified the start of the provision of services for crypto-assets[11] (Title V);
• market abuse with respect to crypto-assets (Title VI).

ESMA and EBA are in the process of drafting regulatory and implementing technical standards to detail the application of the MiCAR, as well as guidelines to facilitate the uniform application of the MiCAR across the Union[12].

In addition, the European Authorities and the European Commission have already provided guidance aimed at promoting the uniform application of the MiCAR across the Union, and in particular:

• the "Statement - ESMA clarifies timeline for MiCA and encourages market participants and NCAs to start preparing for the transition" of 17 October 2023[13];
• the Q&As available on the ESMA website[14] and
• the "Opinion to support the convergent application of MiCA", published by ESMA on 31 July 2024[15].

Transitional measures applicable to crypto-asset service providers

Pursuant to Art. 143 of the MiCAR, crypto-asset service providers that have provided their services in accordance with the applicable legislation before 30 December 2024 may continue to do so until 1 July 2026 or until the issuance or refusal of an authorisation pursuant to Art. 63 of the European Regulation, whichever is the earlier. However, the same article states that Member States may decide not to apply the transitional regime, or to reduce its duration, if they consider that their national regulatory framework applicable before 30 December 2024 is less strict.

In the aforementioned draft decree for adaptation to the MiCAR, in line with the recommendations received from ESMA[16], the option of reducing the transitional period pursuant to the aforementioned Art. 143(3) of the MiCAR was exercised.

In particular, after the entry into application of the MiCAR (from 30 December 2024), all parties duly registered in the OAM register (virtual asset service providers, or "VASPs") as of 27 December 2024 may continue to operate for a period of six months – i.e. until 30 June 2025 – in accordance with the regulations currently laid down in Legislative Decree no. 141 of 2010 and its implementing provisions. In addition, the same parties, provided that they submit an application for authorisation by 30 June 2025, as a CASP, in Italy or in another Member State, may continue to operate pending the completion of the authorisation procedure, until the issuance or rejection of the same and in any case no later than 30 December 2025.

According to the provisions of the aforementioned draft decree, persons who do not intend to submit an application as a CASP by 30 June 2025 must therefore cease their operations in Italy by that date and, consequently, arrange the termination of existing contracts and the return the crypto-assets and funds belonging to customers, according to the instructions given by the customers themselves.

All subjects registered in the VASP register must inform customers and make known on the internet how they intend to ensure their operations are compliant with the MiCAR or, alternatively, if they do not intend to submit an application for authorisation to operate as a CASP, how they intend to manage the orderly closure of existing relationships, as soon as these plans and measures are defined and in any case no later than 31 May 2025, specifying that the activities carried out with respect to customers pending the issuance of the authorisation or the cessation of operations will continue to be subject to the regulations applicable to VASPs and not to the regulations of the MiCAR.

Consob's first instructions to operators

In view of the application of the provisions on the authorisation and operating conditions for crypto-asset service providers, contained in Title V of the MiCAR, and the adoption of the related regulatory and implementing technical standards[17], operators’ attention is drawn to some of the relevant profiles pursuant to the aforementioned regulations.

In particular, Consob invites VASPs to plan, promptly and sufficiently in advance, their adaptation to the MiCAR and to guarantee maximum transparency to their customers and the public with regard to the plans and measures to be undertaken to start the provision of services in accordance with the aforementioned European Regulation or to promptly plan the orderly closure of existing relationships.

Operators who intend to start the provision of services for crypto-assets must adopt, in good time, organisational/procedural safeguards, including internal controls, to comply with the obligations to act honestly, correctly and professionally in the best interest of customers and potential holders of crypto-assets, paying attention to ESMA's convergence initiatives, including the contents of the aforementioned Opinion to support the convergent application of MiCA. Attention is also drawn to the need to promptly prepare effective devices, systems and procedures to prevent, identify and report possible cases of market abuse.

Due to the unique characteristics of the services related to crypto-assets and considering their innovative content deriving from the applied technology, it is recommended that operators provide potential customers with clear and correct information on the services provided and the crypto-assets processed, as regards both marketing communications and subsequent communications to customers.

Operators must ensure that the personnel in charge of carrying out services for crypto-assets have suitable knowledge and competences and adequate experience in the crypto-asset sector. In addition, operators must adopt effective procedures to identify, prevent and manage conflicts of interest arising from the nature and type of crypto-asset services provided, while also taking into account the complexity of the operating model adopted.

With specific reference to the service of managing a crypto-asset trading platform, interested operators must also establish, maintain and implement clear and transparent operating rules, as well as have effective systems, procedures and devices in place to ensure that trading systems comply with the provisions of Art. 76 of the MiCAR[18] and the related technical standards developed by ESMA.

With reference to the issuance, offer to the public and request for admission to trading of ARTs and crypto-assets other than ARTs or EMTs, it should be noted that the white paper, as required by the MiCAR, must contain information regarding significant aspects concerning: the issuer, the offeror or the person requesting admission to trading, the project to be carried out with the capital raised, the offer to the public of crypto-assets or their admission to trading, the rights and obligations related to crypto-assets, the underlying technology used for such crypto-assets and the related risks. The information on the underlying technology, in particular, characterises the white paper compared to the traditional Prospectus prepared for the offer/admission to trading of financial instruments. The white paper must contain correct, clear and not misleading information, presented in concise and understandable form and must not omit relevant information. 

Marketing communications related to crypto-assets must be fair, clear and not misleading and must be consistent with the information contained in the white paper. They must clearly specify that a white paper has been published and indicate the address of the website of the issuer (in the case of ARTs) or of the offeror, of the person requesting admission to trading or of the operator of the trading platform of the crypto-asset in question (in the case of crypto-assets other than ARTs and EMTs) as well as the contact telephone number and e-mail address of that person. It should be noted that the validity of the white paper is equal to the life of the token, unlike the Prospectus relating to the offer/admission to trading of traditional instruments, which is valid for 12 months. Therefore, according to the MiCAR, there are cases where amendment of the white paper may be necessary if, throughout the period in which the tokens are in circulation, there are: changes in the business model such as to affect the related investment decisions, in the case of ARTs; or significant new facts, errors or inaccuracies, in the case of crypto-assets other than ARTs and EMTs.

It should be noted that, as a transitional measure, for tokens other than those admitted to trading before 30 December 2024, the regulations on marketing communications only apply to communications published after 30 December 2024 and the operators of trading platforms, where such tokens are exchanged, must ensure that a white paper is drawn up, notified and published by 31 December 2027.

Issuers, bidders and persons requesting admission to trading of crypto-assets are required, under the MiCAR, to disclose to the public as soon as possible inside information concerning them directly, which could have a significant impact on the prices of such crypto-assets, so as to allow the public full, correct and timely access to them. In this regard, it should be considered that the circumstances and facts relevant for the purposes of these information obligations could also give rise to an obligation to amend the white paper.

***

In order to facilitate adaptation to the new regulation, Consob is available for preliminary discussions with the interested parties, in view of the future submission of applications for authorisation and notifications within Consob’s remit, while also providing clarifications on the information and documentation to be attached to the applications. In particular: 

• in order to receive indications and clarifications in relation to the contents of the white paper for ARTs and for tokens other than ARTs or EMTs, please write to the following e-mail address: interlocuzioni.whitepaper@consob.it; it should be understood that those interested in submitting applications for authorisation or notifications for issuance, offers to the public and requests for admission to trading of asset-referenced tokens (ART) and electronic money tokens (EMT) must refer to the Bank of Italy communication of 13 September 2024;

• operators interested in submitting applications for authorisation such as CASPs or notifications for the provision of services for crypto-assets, other than banks, class 1 investment firms, electronic money institutions, payment institutions and asset management companies, are invited to complete the attached form and send it to the following e-mail address: interlocuzioni.CASP@consob.it.

It is understood, given the informal and preliminary nature of these discussions, that the relevant investigations and administrative proceedings will be initiated only after the entry into force of the legislative decree for compliance with MiCAR; as of this date, in fact, operators will be able to submit formal notifications or petitions, in compliance with the relevant European and national provisions. Consob therefore reserves the right to carry out all the necessary evaluations as part of the preliminary phase that will follow the formal presentation of the notifications or requests.

THE CHAIRMAN
Paolo Savona

[1] The division of responsibilities between the Bank of Italy and Consob does not concern the issuance of EMTs as the Bank of Italy is the competent authority for the issuance of EMTs pursuant to the MiCAR (Art. 3(1)(35).

[2] According to the provisions of Articles 4 and 5 of the MiCAR.

[3] In accordance with the provisions of Art. 16 et seq. of the MiCAR.

[4] Pursuant to Art. 60 of the MiCAR. In this regard, the Bank of Italy is authorised to receive notifications when communicated by banks, class 1 investment firms, electronic money institutions and asset management companies.

[5] It is up to the Bank of Italy, after consulting Consob, to authorise payment institutions and electronic money institutions to provide services for crypto-assets, pursuant to Articles 62 and 63 of the MiCAR.

[6] With the exception of the issuance of EMTs, in relation to which responsibility for supervising transparency, probity and the protection of holders, including marketing communications, lies with the Bank of Italy.

[7] The text of the MiCAR can be found at the following link: https://eur-lex.europa.eu/legal-content/IT/TXT/?uri=CELEX:32023R1114.

[8] Specifically, the MiCAR does not apply to crypto-assets already subject to EU regulation as they qualify as: (i) financial instruments within the meaning of Directive 2014/65/EU, (ii) deposits within the meaning of Directive 2014/49/EU, including structured deposits within the meaning of Directive 2014/65/EU, (iii) funds within the meaning of Directive (EU) 2015/2366, (iv) securitisation positions within the meaning of Regulation (EU) 2017/2402 and (v) non-life or life insurance products, pension products or social security schemes.

[9] MiCAR Title II imposes specific notification obligations on issuers who intend to offer to the public and/or admit to trading crypto-assets other than ARTs or EMTs. In particular, Articles 4 and 5 define the conditions, respectively, for the offer to the public and for the admission to trading of this type of crypto-asset, including the obligations to notify the competent national authority and to publish the white paper, as provided for in Articles 8 and 9. The contents of this information document are detailed in Art. 6, paragraph 12 of which, inter alia, gives the European Commission the power to establish standard forms, formats and templates for white papers, adopting implementing technical standards, based on the projects and proposals developed by ESMA, in conjunction with EBA.

[10] The contents of the application for authorisation as a crypto-asset service provider and the related procedure are governed, respectively, by Articles 62 and 63 of the MiCAR. Art. 62(5) and (6) also grant the European Commission the power to specify the information to be included in the application for authorisation, as well as to establish the relevant formats, models and standard procedures, adopting regulatory and implementing technical standards, based on the projects and proposals developed by ESMA in close cooperation with EBA.

[11] The contents of the notification of the start of the provision of services for crypto-assets by supervised intermediaries and the related procedure are governed by Art. 60 of the MiCAR. Art. 62(13) and (14) also grant the European Commission the power to specify the information to be included in the notification, as well as to establish the relevant formats, models and standard procedures, adopting regulatory and implementing technical standards, based on the projects and proposals developed by ESMA in close cooperation with EBA.

[12] See https://www.esma.europa.eu/esmas-activities/digital-finance-and-innovation/markets-crypto-assets-regulation-mica and https://www.eba.europa.eu/regulation-and-policy/asset-referenced-and-e-money-tokens-micar.

[13] See https://www.esma.europa.eu/sites/default/files/2023-10/ESMA74-449133380-441_Statement_on_MiCA_Supervisory_Convergence.pdf.

[14] See https://www.esma.europa.eu/esma-qa-search-page.

[15] See https://www.esma.europa.eu/sites/default/files/2024-07/ESMA75-453128700-1048_Opinion_on_broker_models.pdf.

[16] See ESMA's letter to ECOFIN "Effective application of the MiCA Regulation" of 17 October 2023. On the other hand, the decree does not provide for the exercising of the option referred to in Art. 143(6) of the MiCAR, given that the regime currently applicable in Italy for the registration of providers of services connected with the use of virtual currency and digital wallet service providers is not comparable to the stipulations on the provision of services for crypto-assets laid down in the MiCAR itself.

[17] Pending such adoption, operators may refer to drafts published by the EBA and ESMA including, in particular, those relating to the information and documentation to be included in the authorisation applications.

[18] Art. 76 of the MiCAR provides for specific obligations relating to the operation of a trading platform – which supplement to those generally provided for all CASPs – regarding: i) operating rules, which must be clear and transparent and have a minimum content and standards (e.g. the need to detail the requirements for the admission and trading of crypto-assets and for access to the platform, ensuring the presence of specific requirements on the adequacy of crypto-assets, objective and non-discriminatory rules promoting fair and orderly trading, effective execution of orders and efficient regulation); ii) verification of the adequacy of crypto-assets, evaluating among other things the reliability of technical solutions and preventing illegal activities; iii) limits and conditions for the operator's operations on the managed platform; iv) resilience, capacity, solidity and operational continuity of trading systems and prevention of market abuse; v) pre- and post-trading transparency; vi) providing information and granting access to the trading book to the supervisory authority.