Virtual currencies: means of payment or financial products?

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In a recent judgment, the Supreme Court (Court of Cassation, criminal section, sec. II, November 10th, 2021, no. 44337) has ruled that bitcoins as well as other virtual currencies are not per se classified as financial products however, should the sale of bitcoins integrate an investment proposal, the offeror is subject to specific duties.

More in detail the discipline provided by art. 91 et seq. of Legislative Decree no. 58 of 24th February 1998 – Consolidated Law on Finance (TUF) applies, thus implying qualification of the virtual currency as a financial product and the application of the relevant regime (art. 94 et seq. TUF) to grant the investor a more effective protection of the investment.

The ruling concerns the appeal against the order of validation of the probationary seizure relating to an Exchange platform considered to be the subject matter of the crime as: “an instrument through which are provided the advertising of the illegal activity and the offer to customers, preparatory instruments to the circulation of electronic money“. In particular, the Court decided to extend the seizure to the Exchange platform on the basis of the classification of virtual currency as a financial product by virtue of an equation between virtual currency and digital gold.

The Supreme Court begun their analysis from the text of the provisions and the relevant definitions adopted by the European and the national legislators. In fact, by Directive 2018/843/EU of May 30th, 2018 amending the Anti-Money Laundering Directive, the European legislator provides a negative definition of virtual currency with the sole purpose of regulating the relationship between virtual currency and current/common currency: “[…] a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.”.

On the other hand, the national legislator, lays down a broader discipline than the one provided by the European legislator and in line with the results of the Public Consultation launched by Consob and entitled ”Initial Coin Offerings and Crypto-Assets Exchanges “published on January 2nd 2020. In fact, art. 1, lett. qq of Legislative Decree 231/2007, as modified by Legislative Decree 125/2019, no. 125 defines virtual currency as “[…] the digital representation of value, not issued or guaranteed by a central bank or public authority, not necessarily attached to a legally established currency, used as a means of exchange for the purchase of goods and services or for investment purposes and transferred, stored and traded electronically“. According to the Supreme Court, the difference between the two definitions lies, according to the Supreme Court, in the investment purpose – subject to review in the judgement in question – expressly provided for by the national legislator among the possible uses of virtual currencies.

The legal principle expressed by the Supreme Court is as follows: “[…] where the sale of bitcoin is advertised as a real investment proposal, there is an activity subject to the requirements of art. 91 et seq. TUF (“CONSOB exercises the powers provided by this part having regard to the protection of investors and the efficiency and transparency of the market for corporate control and capital market”), the omission of which integrates the existence of the offense referred to in art. 166 paragraph 1 lett. c) TUF (which punishes whoever offers off-site, or promotes or places by means of distance communication techniques, financial products or financial instruments or investment services or activities); therefore, at present, bitcoin can be considered a financial product if purchased for investment purposes: when the virtual currency assumes the function, that is the concrete cause, of investment instrument and, therefore, of financial product, must be regulated by the rules on financial intermediation (art. 94 et seq. T.U.F.), which guarantee the protection of the investment through a unitary discipline of special law”.

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