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Virtual currency gets regulated under anti-money laundering laws

Virtual currency for the 1st time falls under Italian anti-money laundering law with the decree implementing the European 4th AML Directive.Giulio Coraggio

The long awaited Italian legislative decree implementing the European 4th anti-money laundering (AML) directive (the “Italian AML Decree“) is now in place and you can read here about the impact on the gaming sector and here on the broader scope of changes introduced.

I believe that a major change relates to the extension of the applicability of Italian anti-money laundering law to virtual currencies and to providers of services relating to virtual currencies.

What changes for virtual currency?

The Italian AML Decree introduces a definition of virtual currency which includes

a digital representation of value, not issued by a central bank or a public authority, not necessarily linked to a legal tender currency used as a means of exchange for the purchase of goods and services and electronically transferred, archived and negotiated“.

Apart from the specific technology behind the virtual currency, what really matters for the AML regulator is that (i) it is not issued by a central bank, (ii) it can be used to purchase goods/services and (iii) it is electronic. This broad definition impacts also the definition of providers of virtual currency services that are defined as

any natural or legal person providing professional services to third parties for the usage, exchange, retention of virtual currency and exchange from, or in currencies having legal tender, to third parties“.

Such providers are required to fulfil specific anti-money laundering obligations with regard to the activities of exchange of virtual currency.

Also, the Italian AML Decree requires virtual currency service providers to be registered in a special section of the register held by the so called “Agents and Credit Brokers Body” which is responsible for the management of the register of financial agents and credit brokers.

This provision shall be implemented by a decree to be issued by the Italian Minister of Economy and Finance, detailing the reporting duties of the virtual currency service providers with regard to the operations carried out in Italy. Such reporting is going to be considered as an essential condition for the lawful performance of the relevant activity by the aforementioned providers.

Is any legal issue around virtual currency now sorted?

It is important to emphasise that the new provisions of Italian anti-money laundering law do not address issues regarding the legality of transactions and any other activity performed by means of cryptocurrencies, bitcoin and any kind of virtual currency.

The matter shall still have to be addressed and the issue is whether the tendency of European regulators to extend currency-related rules to virtual currency is the right route or it risks to vanish the major advantages deriving from its usage whose regulations should be market driven.

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@GiulioCoraggio