On 16 March, in Italy was approved the law-decree (“Law-Decree”) that introduces specific provisions for the issuance and circulation of financial instruments in digital form and simplifies experimentation in the area of FinTech.
The decree implements the measures adopted at EU level as part of the so-called Digital Finance Package, pursuing the digital finance strategy that aims at stimulating competitiveness and innovation in the financial sector, offering consumers greater choice and protection.
The goal has so far been pursued through some very specific regulations: the MiCA (Markets in Crypto Assets), soon to be adopted, is aimed at regulating the offer of crypto-related services in the EU market.
The DORA Regulation (Digital Operational Resilience Act) aims at harmonising, for EU financial entities, the rules on the management of ‘ICT’ risks, i.e. those related to Information and Communication Technologies, and therefore to computer networks and systems (especially ‘cloud’ platforms).
The DLT Regulation, on the other hand, provides for a ‘pilot’ regime for the trading of financial instruments regulated by the so-called MiFID II Directive (in particular, shares, debt instruments, derivative contracts) through market infrastructures based on blockchain technology.
The Law-Decree that has just been approved, conforming to the pilot scheme, introduces the new category of DLT financial instruments, i.e. those issued, transferred and stored by means of distributed ledger technology (DLT), through entries in specific digital registers.
The regime envisaged by the Law-Decree is not applicable to quotas of limited liability companies, that are not compatible with the use of tokens, due to the necessary intermediation of professionals for the updates to the companies’ register required as a result of the transfer of the quotas of limited liability companies.
Regardless of this aspect, alike ‘traditional’ financial instruments, it will also be possible to create liens (such as pledges) on DLT financial instruments.
Therefore, the party that wishes to issue ‘DLT financial instruments’ or subject them to liens will have to use the registers introduced by the Law-Decree, which will have to ensure the authenticity of the transactions and that they cannot be duplicated and that the owners of the instruments can access the data at any time.
Each register will be associated with a single entity in charge (such as banks, investment firms, financial intermediaries, payment and electronic money institutions, insurance and reinsurance companies), who among other things will need an insurance policy to guarantee against possible damages that could arise from the entries.
Among the obligations placed on those in charge of the registry is, in fact, that of adopting appropriate mechanisms and devices:
- to prevent the use of digital financial instruments by persons other than the authorised ones
- ensure the security of the information;
- prevent the loss or unauthorised modification of data and scripts relating to digital financial instruments and ensure that the total number of digital financial instruments constituting a single issuance cannot be modified.
The Law-Decree also introduces measures to simplify the so-called regulatory sandbox regime, i.e. the experimentation of digital technological innovation activities in the banking, financial and insurance sectors offered to FinTech operators. Within certain limits, the experimentation of activities classifiable as investment services and activities will not require authorisation.
Also in this case, the provision is part of the measures taken at European level: on 14 February, the European Commission launched a regulatory sandbox for innovative cases involving distributed technology registers. It will be active until 2026 and will support twenty projects on an annual basis.
The increasingly strategic relevance of technologies is clearly influencing national policies, and it is no coincidence, therefore, that the Law-Decree has been adopted as a matter of urgency to avoid that Italian operators find themselves at a competitive disadvantage compared to those of other Member States.
