Italy: many good reasons to challenge the OAM decree

The OAM decree, after a long period of gestation and after being finally approved, was published in the Italian “Gazzetta Ufficiale” on 17 February 2022. 

The decree, as already reported on The Cryptonomist, presents significant criticalities. As a result, many operators in the sector are considering challenging the decree: the clock has already started and the deadline for lodging an appeal is 19 April 2022.

But which aspects of the decree do operators feel most harmed by? And what are the decree’s weak points?

The first point concerns the identification of the type of services provided and therefore the type of operators who are subject to the obligations of registration in the special section of the OAM register and who will then be required to periodically report on transactions and customers.

In fact, European legislation has required Member States to regulate only those who provide exchange services between virtual and legal currencies and those who provide digital wallet services.

The decree and, more generally, the system derived from Italian legislation, places this type of obligation not only on those who provide this type of service, but also on services that are indirectly related, and that in many cases have nothing to do with the activity of exchange or digital wallets.

Annex 2 of the decree lists these activities and includes the services of issuing virtual currency (i.e. mining), the services of compensation in virtual currencies, and above all a set of activities that the provision generically indicates as “any other service functional to the acquisition, negotiation or intermediation in the exchange of virtual currencies” and among these explicitly includes also the “advisory services on virtual currencies”.

These are activities to which, quite clearly, the European directives did not intend to refer.

These operators, who are different from those providing exchange and digital wallet services, are therefore classified as credit agents or brokers. Their activities, however, do not qualify in any way as brokerage activities.

The case of advisory activities on virtual currencies is perhaps the most striking: if the provisions were to be applied to the letter, a lawyer or accountant advising on legal or tax aspects of a project or transaction involving cryptocurrencies would strictly have to register. This in itself is a problem, as the respective professional rules expressly prohibit mediation activities and (except in specific cases) the simultaneous registration in other registers or lists.

The problem can then be posed in the same terms with reference to other professionals who provide advice on virtual currencies: think of engineers or companies that provide advice in the field of technology. But also persons providing marketing and communication services risk being drawn into the scope of these obligations.

This includes the company that develops the IT platform of an exchange, or provides other types of technology. Hence, the development or marketing of POS or cash dispensers or the development of wallet software or hardware, for example, risks falling within the broad definition of “any other service that is functional to the acquisition, trading or intermediation in the exchange of virtual currencies”.

Therefore, all these subjects will find themselves also under the obligation to communicate to the OAM, not only the data of their customers, but also those referring to the various operations.

Therefore, according to the letter of the decree:

“1. Value in euro, at the date of the last day of the quarter of reference, of the total balance of legal currencies and virtual currencies referable to each client;

2. Number and total value in euro, on the date of the last day of the reference quarter, of the conversion operations from legal to virtual currency and from virtual to legal currency referring to each customer;
3. Number of conversion transactions between virtual currencies attributable to each customer;
4. Number of outgoing and incoming virtual currency transfer transactions from/to the virtual currency service provider per customer;
5. Number and equivalent value in euros, on the date of the last day of the reference quarter, of the amount of outgoing and incoming legal tender transfer transactions from/to the service provider related to the use of virtual currency, attributable to each customer and divided into cash transfers and traceable instruments”.

It is clear that, even if we want to be faithful to the provisions, how is it that a lawyer or an accountant, who has provided advice on a certain operation, or even just a company that has developed an IT platform, or that has offered communication and marketing services, will be able to know (and therefore communicate) the countervalue in euros of the client’s virtual currencies, or of the conversion operations, etc.?

The matter is quite serious because failure to comply with both the registration and communication obligations entails very serious consequences: banning of the activity, closure of the website, and even prosecution for abusive activity.

Then there is another problem, which in this case essentially concerns foreign operators.

The legislation states that the carrying out of the activity on the territory of the republic is subject to registration in the register and that, in order to be included in the register, operators based in another EU country must indicate (and therefore must have) at least one permanent establishment in Italy.

This type of obligation stems from the unscrupulous translation of the obligations provided for the activities of currency exchanges, but seems to overlook the fact that the latter type of