The Bank of Italy has recently expressed its intention to introduce regulating laws to control cryptocurrencies under the Markets in Crypto-Assets Regulation (MiCA) law.
The Bank of Italy is soon expected to publish more details about how it will implement the MiCA law.
In this article, we will look at the European Union’s Markets in Crypto-Assets Regulation (MiCA) framework and how Italy plans to enforce it.
What is the MiCA law?
The Markets in Crypto-Assets Regulation (MiCA) framework was set up inorder to classify and cover various types of digital assets in its financial database.
The law aims to promote and foster the use of upcoming innovative technology-focused value-carrying entities like crypto-assets, their issuers, and their service providers under the guidelines of the EU.
According to the framework the EU lawmakers have defined and classified various kinds of digital assets into different categories.
The MiCAR divided various crypto-assets into the following categories:
- ART or Asset-referenced tokens
Assets-referenced tokens are crypto-asset tokens whose value is derived directly from a particular service or network to which it has links.
An ART can be linked to more than 1 fiat currency, physical assets, cryptocurrencies, or a combination of all three.
- EMT or Electronic money token
- An EMT token (also called e-money token) is a type of crypto asset that has its value directly linked to the value of the official currency of a country. EMT tokens are therefore seen to be more stable for this very reason.
- Other tokens that are neither ART nor EMT-based
In the third category, we have the other tokens that do not fall under the definition of either an ART or EMT-based asset.
This category includes mainly utility tokens whose use is more limited to providing utility to a service or goods that is issued by the issuing group.
Looking into the detailed guidebook of MiCAR the EU lawmakers do further classify the EMT and ART-based assets into further categories based on their issue size, number of token holders, significance of their activities, and so on.
A few of the assets that however do not fall into the MiCAR category include the following:
- NFTs
- Social security schemes
- Financial instruments
- Structured deposits
- Insurance products
The MiCAR regulations furthermore also do not cover crypto-asset services that are fully decentralized like Bitcoin or Ethereum.
The MiCAR services are applicable and relevant to all the EU countries and a few more that fall out of their vicinity such as Switzerland’s Crypto Valley.
Let us now look at what Italy said about its new rules built upon the MiCAR framework
What was the announcement by Italy regarding their new Crypto rules?
Fabio Panetta, Governor of the Bank of Italy made an announcement in his speech at the Italian Banking Association (ABI) in which he made a reference to the role that EMT and ART tokens in its economy.
In his speech, he said that the only instrument that can serve as a trustable means of digital payment is the Electronic Money Tokens or EMTs.
His favoritism for the EMT mode of payment stemmed from the Increased stability and wider usage that it had when compared to ARTs which were only useful in specific contexts and whose value was derived from multiple assets that were more prone to instabilities.
This increased stability that EMTs had was something that he credited to them being issued by banks or other reputable financial institutions.
It is thus clear that Italy is planning to implement a more EMT-favoured legal framework that could see its promotion and wider adoption in the future.
Let us now look at a few of the broader impacts the move could have on Italy’s financial ecosystem.
What are the broader implications of the move?
With the introduction of the new cryptocurrency law, we can expect the Italian government to hit a set of targets that the MiCA has put up as its reasons for existence.
The MiCA has specified that a few of these reasons were to combat fraudulent activities, safeguard investors, ensure proper adherence to rules, and so on.
We can hopefully see these goals being met through the Italian government’s new move.
Final Thoughts
With the new announcement by the Italian government, we can hope that their government will specify and actualize the new laws into their legal framework as soon as possible so that other countries can take inspiration and implement such laws in their own countries.
This could do a lot to instill confidence among digital asset investors and help in further developments in the process of integration between digital assets and traditional finance institutions.
