Current State of Crypto Adoption in Italy
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Around 3.6 million Italians have declared ownership of cryptocurrencies and tokens, reflecting a significant and growing interest in digital assets. Furthermore, since Binance’s establishment in 2022, the company has observed consistent growth in both adoption rates and user registrations in Italy.
A Consob study provides further insights, showing that between 2022 and 2024, the percentage of Italians holding crypto assets rose from 8% to 18%, effectively doubling over just two years.
This jump signals a growing familiarity and interest in digital assets and a rise in crypto adoption in Italy. Additionally, those investing sustainably increased from 11% to 20% in the same period, as per Consob’s report on Italian household investment habits.
The report also notes that younger investors and women increasingly rely on social media for information to guide their investment decisions.
Looking ahead, Italy’s crypto market is expected to reach 18.18 million users by 2025, with a user penetration rate projected to climb to 31.07%. Several Italian banks, like FinecoBank, have embraced this trend by offering several crypto services.
These services include trading, custody, and expert guidance to help clients navigate the crypto landscape.
In response to this rapid adoption, Italy is implementing stricter surveillance on risks tied to crypto assets.
A recent draft decree outlines fines ranging from €5,000 to €5 million for market manipulation, insider trading, and the unlawful disclosure of insider information. This marks a proactive approach to ensuring market integrity and investor protection in the crypto space.
Government Policies and Regulations on Crypto in Italy
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In Italy, the adoption of cryptocurrencies is legal and regulated under a comprehensive legal framework. The country recognizes cryptocurrencies as a form of digital asset.
Crypto’s use is also permitted for various activities, including trading, investment, and payment for goods and services.
The European Union's new Regulation (EU) 2023/1114, or the Markets in Crypto-Assets Regulation (MiCAR), introduced a comprehensive framework for crypto-asset services within the EU as of June 2023.
MiCAR standardizes the issuance, public offering, and service provision of crypto-assets across member states. This is particularly for crypto-assets that do not fall under pre-existing EU financial regulations.
Furthermore, MiCAR classifies crypto-assets into three categories:
- E-money Tokens (EMT): Tokens pegged to a single fiat currency, intended to provide stable value for payment purposes.
- Asset-referenced Tokens (ART): Tokens pegged to assets or currencies (or a combination), designed to maintain value stability.
- Other Crypto-assets: A residual category covering all tokens not classified as EMTs or ARTs.
Under MiCAR, entities wishing to issue or offer ARTs must obtain the necessary authorizations and are subject to the supervision of the designated national authorities. Banks can issue ARTs upon notifying the relevant authority.
EMTs, on the other hand, are restricted to banks and electronic money institutions, which also need to notify their national authority. Additionally, the regulation introduces a new category of authorized intermediaries called crypto-asset service providers (CASPs).
CASPs, and other already-supervised intermediaries, can offer crypto-asset services. These services include exchange, custody, and advisory services, under certain conditions.
The Role of Italy’s Regulatory Bodies
In July 2024, the Bank of Italy issued a Communication on how to apply MiCAR and provided guidelines for its implementation in Italy.
It proposed that the Bank of Italy and Consob (Commissione Nazionale per le Società e la Borsa) serve as Italy’s competent authorities under MiCAR.
The Bank of Italy would supervise EMT and ART issuers, overseeing transparency, fair conduct, and EMT holder protections. It would also monitor CASPs and intervene if necessary to stabilize the financial system regarding crypto assets.
Consob would regulate crypto assets outside the EMT and ART categories, enforcing transparency and fairness while protecting market integrity.
With MiCAR’s new requirements, the Bank of Italy outlined specific guidance for crypto stakeholders:
- For EMT Holders: Potential holders should understand the associated risks and their rights, especially the redemption right, which allows EMT holders to reclaim the token's value at any time.
- For Banks and E-Money Issuers of EMTs: Issuers are advised to adjust their complaint-handling procedures to reflect EMTs’ unique aspects and relationships with holders.
- For Supervised Entities: Entities must ensure adequate expertise, particularly at the management level, and involve corporate governance from the planning stage of new crypto initiatives.
- For Outsourcing Entities: When outsourcing to third parties, thorough vetting of suppliers is necessary to ensure adherence to regulatory obligations.
- For Entities Offering New Activities: Entities must ensure compliance with anti-money laundering and anti-terrorism financing provisions.
Italy’s MiCAR Implementation: Legislative Decree No. 129/2024
On September 5, 2024, Italy published Legislative Decree No. 129, aligning national regulations with MiCAR’s requirements. It introduced a 12-month transition period for Virtual Asset Service Providers (VASPs) already registered in Italy as of December 27, 2024.
Registered VASPs can continue their services until June 30, 2025, provided they apply for CASP authorization in Italy or another EU Member State by this date.
The decree also outlines a more rigorous standard for CASPs, requiring them to operate as joint stock or limited liability companies. It also provides that they should meet the same governance standards as banks, and adhere to stricter financial reporting requirements.
Additionally, CASPs must segregate customer crypto assets and funds, protecting them from creditor claims in case of financial difficulties.
Furthermore, CASP applications must be submitted to Consob, Italy's securities market regulator. From there, Consob will decide on authorization after consulting with the Bank of Italy.
MiCAR also imposes criminal penalties for unauthorized crypto-asset services or EMT/ART issuance that fails to meet regulatory requirements.
Anti-Money Laundering (AML) and Data Protection Measures
Italy’s approach to regulating cryptocurrency is rooted in security, transparency, and the protection of customer data.
The country’s implementation of the EU’s 5th Anti-Money Laundering Directive (AML 5 Directive) through Legislative Decree No. 125 of 2019 requires crypto service providers to register with the OAM Register.
The aim of registering is to prevent financial crimes like money laundering and terrorist financing by ensuring greater oversight of crypto transactions.
To further protect investors, Italy enforces stringent data protection rules in line with the EU General Data Protection Regulation (GDPR).
This regulation mandates that crypto service providers adopt robust security measures to safeguard customer data and digital assets. On the legal side, Italy’s Criminal Code (section 640-ter) specifies penalties for cybercrimes that involve unauthorized data access or system tampering in the crypto space.
The Organismo degli Agenti e dei Mediatori (OAM) also plays a key role here, by enforcing anti-money laundering (AML) compliance for crypto exchanges.
Virtual service providers (VASPs) must register with the OAM, adhere to strict Know Your Customer (KYC) protocols, conduct background checks on management, and ban anonymous accounts.
Taxation of Crypto in Italy
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As of January 1, 2023, the Italian 2023 Budget Law has introduced specific regulations for taxing crypto-assets, particularly regarding income tax for individuals who are not entrepreneurs.
Here is a breakdown of how it works:
Capital Gains and Income Taxation
Under the new tax regime, individuals (non-entrepreneurs) are subject to a 26% substitute tax on any "capital gains or other income" earned from selling, exchanging, or holding crypto-assets.
This includes activities like reimbursement, sale, or swap of crypto-assets, regardless of their type. Such gains are classified as "other income" (redditi diversi) in Italy's tax system. However, this tax applies only if the total capital gains within a calendar year exceed €2,000.
In October 2024, the Minister of Economy and Finance, Giancarlo Giorgetti, proposed an increase in the crypto capital gains tax rate from 26% to 42%, to be implemented as part of Italy’s 2025 Budget.
During a conference in Rome, he emphasized the high-risk nature of cryptocurrencies. He also argued that investors should distinguish between assets funding tangible projects and crypto-assets, which he noted often lack underlying value.
"Cryptocurrencies present a very high level of risk." Economy Minister Giancarlo Giorgetti
This change, intended to raise an additional €16.7 million annually, would bring expected revenue from crypto taxes to €43.7 million per year.
Notably, swaps between crypto-assets with similar characteristics are not taxable. For example, selling Bitcoin for Ethereum is tax-free, but selling Bitcoin for an NFT is not, as NFTs are not considered to have the same function.
Calculation of Capital Gains
Capital gains are calculated as the difference between (i) the sale price or "normal value" of exchanged assets and (ii) their purchase or acquisition cost. The “normal value” is determined by the average market price of the asset.
If no specific purchase value can be documented, it defaults to zero. Capital gains and losses are summed up at the end of the year, and any net loss exceeding €2,000 can be deducted from future gains for up to four years, provided it’s reported in the relevant tax return.
Income from Holding Crypto-Asset
Income generated merely by holding crypto-assets is also subject to a 26% substitute tax, though specifics on which holdings apply are still pending further clarification from the Italian Tax Authority. For instance, income from activities like staking may fall under this rule.
Tax Regimes for Crypto-Assets
Italy offers three tax regimes for financial income, and the 2023 Budget Law allows individuals to choose one of these regimes for their crypto investments:
- Self-Declaration Regime: Here, taxpayers must declare their income and pay taxes based on their annual declaration. Capital losses can offset future gains for up to four years.
- Administered Savings Regime: In this regime, investors can choose to open an account with a financial institution that handles their tax obligations. Taxes are calculated and applied on each transaction, simplifying the tax process for the individual.
- Managed Savings Regime: This option applies when a financial institution manages an investor's portfolio. Taxes are based on the net annual result of the portfolio, with gains and losses offset within the year. Only certain institutions, such as banks, can offer this regime.
It is important to note that individuals can now choose the administered savings regime even if their crypto-assets are held by a VASP registered in Italy.
If this option is chosen, the VASP calculates, withholds, and pays taxes on behalf of the individual, much like traditional financial institutions do for stocks or bonds.
Registered VASPs in Italy must also meet specific obligations:
- Tax Payment: VASPs must pay due taxes to the Italian authorities on behalf of customers, typically by the 15th of the second month following the taxable event. They may deduct the tax amount from the customer’s account or request payment.
- Annual Reporting: VASPs must report total capital gains and income and apply substitute taxes annually to the tax authorities.
Stamp Duty on Crypto-Assets
As of January 1, 2023, crypto-assets are also subject to a 0.2% stamp duty on the total value of the assets, similar to other forms of financial assets. Payment timelines for this duty align with those for traditional financial assets.
Professional Income and Penalties
For those generating income from crypto through professional activity, the income is subject to Italy’s personal income tax (IRPEF), with rates up to 43% plus local surcharges.
While the law doesn't define "professional activity" in crypto explicitly, factors like transaction frequency, income volume, and advertising efforts may indicate a professional-level activity.
For those eligible for the €2,000 exemption threshold, gains below this level aren’t taxable. However, failing to report relevant crypto gains can result in penalties from 3% to 15% of the undeclared amount.
Factors Driving Crypto Adoption in Italy
Cryptocurrency adoption in Italy is steadily rising and several factors are fueling its growth. These factors include:
Increasing Interest Among Younger Generations
One factor driving crypto adoption in Italy is that Gen Zs and Millennials are becoming more interested in cryptocurrencies. This is largely due to their familiarity with digital technology and the growing presence of digital financial platforms.
A recent survey commissioned by Bitpanda, Europe's leading cryptocurrency broker, and conducted by YouGov, highlights this trend.
The study shows that younger generations are at the forefront of digital currency usage across Europe. Furthermore, it noted that about 9% of the population in Italy are cryptocurrency owners.
These groups, raised in an era of rapid technological advancement, view digital assets as a natural extension of their financial lives. They are more comfortable exploring new forms of investment, seeing cryptocurrencies as both innovative and potentially profitable.
Accessibility Through Digital Platforms
Platforms like Bitpanda and other exchanges have made access to the cryptocurrency market easy for young Italians as they offer user-friendly interfaces and educational resources.
This accessibility allows Italians, especially younger users, to buy, sell, and hold digital assets with minimal barriers. As a result, more people are inclined to explore and invest in cryptocurrencies.
Convenience of Digital Payments
The rise of contactless payments and online shopping has increased digital currency acceptance. Italians, especially young people, are drawn to the ease of crypto transactions.
This is because crypto transactions often have lower fees and faster processing times than traditional payment methods. For a generation accustomed to digital experiences, using crypto for purchases and transfers is a natural progression.
Technological Advancements and Blockchain’s Potential
Blockchain offers Italy, a way to modernize its financial and business sectors. Italian companies such as Investables S.R.L. are exploring blockchain to improve supply chains, secure records, and enhance transparency.
As businesses adopt blockchain solutions, the use of digital currencies is likely to increase as well, driving familiarity and trust among consumers.
Emerging technologies such as artificial intelligence and blockchain are going to shape our lives, the society we live in and the economic and productive approach of our country. We have to choose our side: keep following the process of development determined at a global level or being part of the change trying to shape these processes with well-designed national strategies to exploit the excellent examples we have in our country in the technology sector.
Community and Peer Influence
Social media, influencers, and online communities play a large role in Italy's crypto landscape. Young Italians are influenced by global trends and discussions surrounding digital assets.
Challenges to Crypto Adoption in Italy
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There are several challenges to crypto adoption in Italy and they include
Complex Regulatory Environment
Italy’s crypto market faces significant regulatory uncertainty, with evolving rules around anti-money laundering (AML) and taxation.
While these regulations aim to ensure security, the frequent updates and complex compliance requirements can be difficult for new and smaller crypto businesses to navigate.
This uncertainty can discourage adoption as companies and investors remain cautious about the regulatory landscape.
High Tax Burdens
Italy has relatively high tax rates on cryptocurrency gains, which can dampen interest in trading and investment.
Taxes on crypto earnings are often treated similarly to those on other financial assets, leading to capital gains tax obligations that some see as unfavorable.
This high tax burden can deter both local and foreign investors, slowing the growth of the crypto industry. Additionally, the recent proposed 42% tax increase has also sparked controversies and has been met with shock from several people.
Cybersecurity and Fraud Concerns
Concerns about cybersecurity and fraud also pose challenges to crypto adoption in Italy. Incidents of hacking, phishing, and other cyber threats targeting crypto exchanges and wallets have raised doubts about the safety of digital assets.
Although many crypto platforms have improved their security standards, the potential for cybercrime remains a deterrent.
Limited Public Awareness and Understanding
While the global profile of cryptocurrency is growing, Italy’s general public awareness and understanding of crypto remain limited. Many potential investors are hesitant, often due to misconceptions about the nature and security of cryptocurrencies.
This lack of understanding is compounded by limited access to educational resources or trustworthy advisory services on digital assets, leading to a perception of crypto as high-risk or speculative. Here is Fabio Panetta, the Governor of the Bank of Italy describing cryptocurrencies:
They are created using IT procedures and there is no person or real or financial activity that ensures their value. They are sometimes traded on informal and opaque circuits or platforms not subject to adequate controls.
Cryptocurrency Usage in Various Sectors in Italy
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Italy has been steadily adopting cryptocurrency across various sectors. The country's embrace of digital currencies can be seen in several key areas: retail, tourism, finance, and real estate.
Below, we look at how cryptocurrency is currently being utilized in these sectors and its associated benefits.
Retail and E-commerce
Cryptocurrencies have found a significant place in Italy's retail and e-commerce industries. Several online stores and physical shops now accept Bitcoin, Ethereum, and other digital currencies as payment options.
This move has increased customer convenience and expanded the market base, attracting crypto enthusiasts who prefer using digital assets.
Tourism and Hospitality
Italy, known for its tourism industry, has seen a surge in hotels, travel agencies, and restaurants accepting cryptocurrencies.
This is beneficial to international travelers who prefer using digital currencies to avoid the hassle of currency exchanges and high fees.
For example, travel platforms like Travala have expanded their services in Italy, offering crypto payment options for flight and hotel bookings.
Finance and Banking
Italy’s financial sector has also started exploring the use of cryptocurrency and blockchain technology. Several fintech companies and banks are integrating crypto services, including offering custodial solutions and enabling Bitcoin trading.
For instance, Hype, an Italian neobank, allows users to buy, sell, and store Bitcoin directly from its app.
Real Estate
The real estate market in Italy has also embraced cryptocurrency as a payment method. Several property developers and real estate agencies now accept Bitcoin and other cryptocurrencies for property purchases.
A notable example is the sale of luxury apartments in Milan, where buyers can use Bitcoin as a payment option. This approach has opened the market to international investors interested in using their crypto assets to invest in Italian real estate.
Conclusion
As Italy navigates the complexities of crypto adoption, it is at an exciting point in its journey toward embracing cryptocurrency.
With its comprehensive regulatory framework, including the GDPR protections and tax framework, Italy is making strides toward creating a secure environment for cryptocurrency users.
However, challenges such as regulatory uncertainty and high tax burden continue to pose significant obstacles. To enhance crypto adoption in Italy, the country needs to focus on educating the public about cryptocurrencies and enhancing cybersecurity measures.
Additionally, encouraging collaboration between traditional banks and the crypto sector could also help bridge the gap. By tackling these challenges together, Italy can tap into the potential of cryptocurrency, sparking innovation and boosting economic growth.
