Italy Hasn't Vetted the 73 Crypto Firms It Approved This Year

ROME — Italy may be rubber-stamping crypto firms’ applications to operate in the country without running proper checks to make sure they are safe for investors.

This summer, a string of prominent crypto firms – including Coinbase, Binance and Crypto.com – announced they had secured regulatory approval to continue operating in Italy. In effect, the companies were entered into a registry set up to ensure companies were compliant with the country’s anti-money laundering standards.

The Organismo Agenti e Mediatori (OAM), a supervisory body in Italy that maintains lists of financial agents like credit mediators and money changers operating in the country, has indeed been busy. While regulators are usually criticized by the industry for delays in processing applications, Italy’s OAM has quickly added 73 crypto firms – including the ones listed above – to its new roster for virtual currency service providers, which only opened in May.

When Coinbase was added to the OAM register in July, the firm said it reached “a key milestone” in the journey to serving European customers, adding that it had secured “approval from Italian regulators to provide ongoing crypto services to its residents.” Similar statements were issued by Binance and Crypto.com.

Obtaining regulatory approval or qualifying for registration with a local regulator tells investors that a company has been scrutinized by relevant authorities in the country. But in Italy, the “regulatory approval” alluded to in these statements may not carry the weight of assurance it implies.

Although registration with the OAM is now mandatory to continue operating in the country, no company was vetted before being added to the list. The OAM has confirmed to CoinDesk that it is still deciding on how to collect the relevant data from companies – and that it probably won’t start collecting information until next year. This means that Italy’s supervisory authorities are not currently monitoring the fund flows or controls in place to prevent criminals or bad actors from using these platforms to move money.

“Italy is probably, as far as I'm aware of, the jurisdiction with the most simple process. It's just a registration,” said Francesco Dagnino, managing partner at Lexia Avvocati, a Milan-based law firm that has handled the applications for around 16 out of the 72 firms on the OAM list.

Read more: Italy Formally Lays Out Crypto Firms' New AML Requirements

The Italian registration process is “very light” compared to other jurisdictions in the European Union and does not require compliance with any particular requirements – like operational integrity or anti-money laundering (AML) standards – for the purpose of the registration, Dagnino said.

For comparison, France’s Autorité des marchés financiers (AMF) requires companies to present four different forms detailing operations, executive management, significant shareholders and internal AML controls to earn a spot in the country’s equivalent crypto registry. Some global platforms like Binance and Crypto.com have also qualified for registration with the AMF as well.

Bitcoin, which came with a manifesto that promised to disrupt traditional finance back in 2009, may have predicted a crypto industry which prided itself in preserving privacy and evading the influence or interactions with the institutions and regulators that paved the way for the 2008 economic crisis. But the industry has come a long way, growing from niche networks to a multi-billion dollar global market.

As the crypto world ballooned, inviting more members of the general population into its complex folds, centralized trading exchanges began flaunting “regulatory approval” as a badge of honor – signaling to investors that these companies are safe and that they abide by anti-money laundering or investor-protection standards set forth by the jurisdictions they operate in.

In the dead of the coldest crypto winter on record, when some of the industry’s top players came crashing down along with market prices, the news of a regulator greenlighting a crypto platform seemed to carry even more weight than usual. When sports token issuer Socios said Italian regulators had approved it after the firm was added to the OAM list, football fan tokens rallied in the days that followed.

In its most recent evaluation, global AML standard setter, the Financial Action Task Force, said Italy’s current measures to counter money laundering are “extensive and mature” but “more effort needs to be devoted by supervisory authorities to ensure the legal framework is effectively implemented by reporting entities.”

A spot on the registry

In February, Italy implemented its new anti-money laundering rules for virtual asset service providers (VASPs) operating in the country. The decree from the Ministry of Economics and Finance mandated the creation of a special roster for crypto firms.

Once OAM opened the roster in May, all crypto firms already operating in the country and those that wished to enter the market had to apply for registration. VASPs that were already offering services to Italians were required to apply to be added to the registry by July 15. Once an application is submitted, the OAM has to approve or deny entry into the roster in 15 days.

The application requires the submission of 10 pieces of information which include the company name, a tax or fiscal code (easily obtained at an office of the country’s revenue agency), an email address, any physical points of operation including ATMs and a web address.

Most importantly, to qualify for the registry, the applicant must also provide a “registered office and, if different from the registered office, the administrative office.” If the VASP’s office is in another EU member state, a “permanent establishment” has to be set up in the Italian territory. Put simply, an operational office or physical point in Italy is a requirement to qualify for the registry, the OAM told CoinDesk in a written statement.

That doesn’t mean companies are actually setting up shop in Italy though.

Binance, for instance, has an address in the southern Italian province of Lecce, the register shows, under the entity name Binance Italy LLC. However, the company doesn’t have big plans for the office.

“We plan to open offices in Italy soon and are looking at options across Italy. The office in Lecce is only a formal step and, most likely, will not be the administrative office,” Simon Matthews, public relations director at Binance in Europe said in an email to CoinDesk.

Both Crypto.com and Coinbase have listed the same local address in the OAM registry: Stradello Marche 6, 43121 in the Italian city of Parma. A spokesperson for Coinbase told CoinDesk that the company does not have a “physical presence in Italy” and the address belongs to the company’s accountant. Spokespeople for Crypto.com did not respond to a request for comment.

Both companies have a “permanent establishment” in Italy, so they are compliant with registration requirements, OAM told CoinDesk.

Not a license

A place in the OAM registry is a promise that the company will be scrutinized by regulators in the future to make sure they comply with local AML requirements.

The operators registered in the roster are “legally recognized as legitimate services in Italy” according to the OAM, which added that it plans to start collecting “customer data” and information on “operations carried out” from the companies in the coming months.

“It's not that you literally get a license. It does not mean that you pass some particular scrutiny from the regulators,” Dagnino said.

Another big name on the list is Austria-based cryptocurrency exchange Bitpanda, which began operations in Italy in 2021.

“It should be remembered that registration as a VASP with the OAM is not the end of the process, but only a first step,” said Martin Erhold, public policy lead at Bitpanda, in an email to CoinDesk. “All VASPs will now be directly scrutinized for compliance with applicable AML rules and will need to demonstrate their setups are effective.”

Read more: Binance Sued in Italy Over Exchange Outages, Hearing This Week

Bitpanda was one of the companies that were operating in Italy well before the opening of the register.

“We already had a local branch and team in Milan… a prerequisite for us to operate appropriately in the market, so we were already subject to Italian laws, including local tax law,” Erhold said.

Binance declined to comment on tax implications.

Erhold described the OAM registration as a “simple and smooth” process, but said not all companies have followed Bitpanda’s path.

“Today we see that only a few leading players have registered and do not have a clear intention to localize operations in the Italian market,” Erhold said. He did not name any leading players.