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Global Financial Regulations 2022

Financial regulations in Italy

Italy was one of the world’s worst-affected countries by the COVID-19 pandemic, which tragically led to over 120,000 deaths, plunged the economy into recession and highlighted fragilities in the country’s cybersecurity framework and digital readiness.

Country Overview

Italy was one of the world’s worst-affected countries by the COVID-19 pandemic, which tragically led to over 120,000 deaths,1 plunged the economy into recession and highlighted fragilities in the country’s cybersecurity framework and digital readiness. Indeed, Italy lags far behind its well-developed European peers in digital transformation indicators, ranking 25th in the European Commission’s Digital Society and Economy Index (DESI) 2020. A third of households do not have a computer,2 cash use has long dominated and ICT graduates are few.3

Digital unpreparedness made Italy susceptible to a surge in cyberattacks amidst the pandemic, with a 47% rise in attacks in the first quarter of 2021 compared with 2020.4 Meanwhile, the GDP contracted by 8.9%5 and public debt—the third-highest in the world6—ballooned. The ensuing shift online has had some positive effects on Italy, however, as it has accelerated Italians’ adoption of innovative technologies—especially cashless payment solutions and e-commerce—and spurred on more governmental efforts to digitalize.  

Italy’s EUR 235 billion (approximately USD $279 billion) recovery plan, which draws mostly from the EU’s Recovery and Resilience Facility, with additional funds from the REACT-EU Initiative and public finance,7 will help in its digital transformation goals. The plan hinges on six pillars, including digitalization, innovation, competitiveness, culture, education and research.8 Alongside its recovery plan, Italy’s 2021 digital agenda focuses on promoting cashless payment solutions, continuing its experiments in blockchain-based projects and supporting the emergence of fintech and innovative technologies. 

Financial Regulatory Authorities

Central bank: The Bank of Italy (La Banca d’Italia) is the country’s central bank. The bank’s main function is to ensure the stability and efficiency of Italy’s financial system. The bank pursues its goals through secondary legislation, controls and cooperation with government authorities.  

Data protection authority: The Garante per la Protezione Dei Dati Personali, or the Garante, is the national data protection authority in Italy. The Garante is composed of an elected Council and an Office of 162 members. 

Commissione Nazionale per le Società e la Borsa (CONSOB) is the government authority responsible for regulating the Italian securities market, including the stock exchange, Borsa Italiana. 

The Digital Italy Agency (AgID) is a governmental agency that manages the implementation of the Italian Digital Agenda’s objectives in line with the EU Digital Agenda. The agency defines regulations, standards and guidelines to effectively provide online services to citizens. 

Other Regulatory Authorities 

The Italian Competition Authority (AGCM) is an independent non-governmental organization in charge of enforcing consumer protection laws and anti-trust regulations. 

The Financial Intelligence Unit (FIU) is an independent organization established under Legislative Decree 231 of 2007 that analyzes financial information with the goal of preventing money laundering and combatting terrorist financing. The Bank of Italy issues the regulations and rules governing the FIU. 

Policy, Laws and Regulations

Guarantee Blockchain Project Completes Pilot Phase, 10 May 2021 

Fideiussioni Digitali, a blockchain project for issuing guarantees or surety bonds, successfully completed its 4-month pilot phase. The project seeks to crack down on fraud in the surety sector, and the pilot phase found a 30% reduction in fraud alongside a cost savings of 10% to 50%,9 increased transparency and speed. A collaboration between CeTIF (Research Centre on Technology) and tech companies SIA and Reply, the project will undergo regulatory and technical improvements before an expected launch in the second half of the year. The Bank of Italy, Italian Finance Police and insurance authority IVASS were also involved. 

Italy recently saw another key development in its blockchain initiatives. The Spunta project, a DLT-based interbank reconciliation spearheaded by the Italian Banking Association (ABI) and its lab (the ABI Lab), went fully operational on 13 October 2021. About 100 banks are interconnected through nodes in a blockchain-based, automatic reconciliation of bilateral accounts, a process previously conducted through telephone calls and messages. The process uncovers mismatched transactions through a shared algorithm, which allows for a standardized approach across participant banks. This streamlined, automatic process enables daily reconciliations, rather than monthly ones, and strengthens transparency while reducing operational risks. The Italian Banking Association predicts that Spunta will have processed over 350 million transactions by the end of 2021.10

Bank of Italy and CONSOB Issue Warning on Investing in Cryptoassets, 28 April 2021 

The Bank of Italy and CONSOB issued a warning, directed especially at “small savers,” regarding the high risks in dealing with cryptoassets. Due to the lack of a comprehensive regulatory framework, cryptocurrencies like bitcoin pose inherent risks like volatility, a lack of legal protections, a lack of information requirements for operators, protections for the invested money and more. Increased digitalization and the “spread of offers” has facilitated the purchase of cryptoassets. The communication reiterates its warning and notes that, although the European Commission has proposed its Markets in Crypto Assets (MiCA) regulation, cryptoassets are still insecure and lack substantive oversight. 

In a January 2021 interview, Colonel Tommaso Solazzo of Italy’s Guardia di Finanza, a law enforcement agency responsible for financial crime, pointed to criminal exploitation of the anonymity offered by cryptocurrencies.11 This comes on the heels of a December 2020 announcement by Italian police that a crypto exchange operator was responsible for a series of hacks that defrauded over 230,000 people of EUR 120 million (approximately USD $143 million). According to the police, “It is the biggest cyber-financial attack in Italy and one of the biggest in the world… For the first time in Italy and in Europe, we have documented fraudulent and rapacious conduct to the detriment of investors carried out entirely on IT platforms and via the use of virtual currencies.12” The central bank and CONSOB have long issued warnings to consumers regarding the risks in cryptocurrencies. 

Communication on the Prevention of Financial Crimes Linked to COVID-19, 10 February 2021 

The Financial Intelligence Unit released a communication on “Preventing financial crimes phenomenon linked to the COVID-19 emergency,” which details risks related to the increased use of digital solutions. The FIU notes that e-commerce and other instances in which digital payment solutions are utilized incur the risks of fraud and other cybercrime activities.  

In 2018, e-commerce accounted for only 6.5% of all retail in the country,13from EUR 3 to 4 million but Italians have gravitated towards online shopping amidst strict lockdowns and other COVID-19-related safety measures. First-time online shoppers totaled 2 million in 2020, and the number of SMEs using e-commerce rose by 50%.14 Internet penetration and smartphone use—the rates of which are still low in Italy—will be instrumental in further boosting e-commerce, as will government-led cashless incentives. 

Data Protection Authority Publishes 2021 Objectives, 09 February 2021 

The Data Protection Authority published its 2021 objectives, which include collaboration and cooperation with national data protection authorities of other EU member states; investigations into data breaches and the processing of personal data by “data brokers”; boosting transparency; and tracking developments in digitalization’s impact on business regarding data protection. The authority is particularly concerned about the emergence of new technologies such as AI solutions, especially relating to the use of biometric data in facial recognition. 

Italian Banking Association Announces Experimentation into Digital Euro, 22 December 2020 

The Italian Banking Association (ABI) announced that it and its ABI Lab have begun experimentation on the possible development of a digital euro backed by distributed ledger technology (DLT). According to Silvia Attanasio, Head of Innovation at ABI, “The experiment is divided into two work areas: one involving the infrastructure and distribution model to analyse technical feasibility, and the second focusing on programmability to experiment with use-cases that can differentiate the central bank’s digital euro from already-available electronic payments.15” The first stage of experimentation will involve a partnership between SIA, Italian payments network firm, and the ABI Lab Chain, which has been crucial in developing the Spunta blockchain project. The second stage will rely on collaboration between working groups and banks, NTT Data, PwC and Reply. 

Bank of Italy Launches Milano Hub to Encourage Innovation, 04 December 2020 

The Bank of Italy launched its Milano Hub, an effort to address technological shortcomings in the financial services sector; attract international talent and investment; preserve financial stability; support banks amidst digitalization challenges; and convert Milan—and Italy as a whole—into a major innovation hotspot. Private sector entities will have an opportunity to utilize Milano Hub as a sandbox of sorts, with the central bank overseeing projects to ensure that solutions are safe and risk-free. A team of financial innovation experts has chosen 20 projects centered on machine learning and/or big data. Although the project is ambitious, it remains to be seen whether its goals will come to fruition. 

Other recent developments point to Italy’s serious intentions in cultivating a more robust fintech ecosystem. Law No. 178 (the “Budget Law 2021”), published 30 December 2020, offers tax credits for investments in research and development. The tax incentive, applicable until 31 December 2022, increased from 12% to 20%, and the expenses limit increased from EUR 3 to 4 million.16  

In February 2021, Prime Minister Mario Draghi appointed ex-Vodafone CEO Vittorio Colao—who had previously headed the pandemic-recovery task force—as the new Technological Innovation and Digital Transition Minister. Colao is particularly eager to onboard more citizens to the Sistema Pubblico di Identità Digitale (SPID), a digital ID infrastructure that allows Italians to access government services online. Says Colao, “If I had to say why Italy is behind today, it is because of legal and administrative complexity, which as a government we are determined to simplify."17

Italy Announces Cashless Plan, 01 December 2020 

The Italian government launched its Italia Cashless plan in an effort to promote increased use of digital payment solutions. From 01 January 2021 onwards, users of cards and payment apps can receive a 10% refund on purchases from bars, restaurants, shops, supermarkets and other establishments. The rebate is calculated every six months and users must have made 50 or more cashless transactions to be eligible for it. The maximum reimbursement per six-month period is EUR 150.  

As part of Italia Cashless, the Italian Ministry of Finance and Economy also instituted a Lottery of Receipts, which went into effect 01 February 2021. Each purchase of at least one euro by a digital payment solution such as a card or app automatically creates a virtual ticket, entering the user into the lottery. Each euro spent creates one virtual ticket, for a maximum of 1,000 tickets per receipt. Participants must register on the lottery portal and present their lottery code to retailers upon purchase.  

The cashless incentives have further accelerated the increased adoption of the Sistema Pubblico di Identità Digitale (SPID), a digital ID system that allows citizens to access public administration services online. On 01 March 2021, all public administrations were required to offer citizens access to their services using their digital IDs.18 At the end of January 2021, about 17 million digital IDs had been issued through the SPID system.19


Reference:

1. “Italy.” Worldometer, 08 June 2021. https://www.worldometers.info/coronavirus/country/italy/.

2. Orlandi, Giorgia. “Italy's digital divide: One third of students don't have access to online lessons.” Euronews, 02 April 2021. https://www.euronews.com/2021/04/01/italy-s-digital-divide-one-third-of-students-don-t-have-access-to-online-lessons.

3. Za, Valentina et al. “Pandemic leaves digital laggard Italy scrambling to catch up.” Reuters, 21 March 2021. https://www.reuters.com/article/us-health-coronavirus-italy-digital-insi/pandemic-leaves-digital-laggard-italy-scrambling-to-catch-up-idUSKBN2BD0AX.

4. “Covid makes cybercrime soar in Italy: + 47% between January and March 2021.” Italy24 News, 06 May 2021. https://www.italy24news.com/News/41216.html.

5. “Italy's economy seen growing 4.1% this year, business lobby says.” Reuters, 10 April 2021. https://www.reuters.com/article/us-italy-economy-growth-estimates-idUSKBN2BX0AE.

6. Za, Valentina et al. “Pandemic leaves digital laggard Italy scrambling to catch up.” Reuters, 21 March 2021. https://www.reuters.com/article/us-health-coronavirus-italy-digital-insi/pandemic-leaves-digital-laggard-italy-scrambling-to-catch-up-idUSKBN2BD0AX.

7. Fonte, Giuseppe and Gavin Jones. “Draghi says deal reached with EU on Italy's recovery plan – officials.” Reuters, 25 April 2021. https://www.reuters.com/world/europe/draghi-says-deal-reached-with-eu-italys-recovery-plan-officials-2021-04-25/.

8. “Recovery and Resilience Facility: Belgium, Italy, Austria, and Slovenia submit official recovery and resilience plans.” European Commission, 01 May 2021. https://ec.europa.eu/commission/presscorner/detail/en/ip_21_2101.

9. “Central bank backed surety, guarantee blockchain completes pilot, to launch this year.” Ledger Insights, 10 May 2021. https://www.ledgerinsights.com/surety-guarantee-blockchain-completes-pilot-launch-this-year/.

10. Handagama, Sandali. “Around 100 Italian Banks Are Officially on a Blockchain.” Coindesk, 13 October 2020. https://www.coindesk.com/italian-banking-association-100.

11. Nazarro, Sergio. “EXCLUSIVE: Inside Italy’s fight against money laundering and the innovative new methods used to stay ahead of the mafia’s use of technology to hide its dirty money.” AML Intelligence, 25 January 2021. https://www.amlintelligence.com/2021/01/exclusive-inside-italys-fight-against-money-laundering/.

12. “Italian police accuse cryptocurrency exchange boss of huge fraud.” Reuters, 21 December 2020. https://www.reuters.com/article/italy-cyber-cryptocurrency-idINKBN28V1XQ.

13. “2020 E-commerce Payments Trends Report: Italy.” J.P. Morgan. https://www.jpmorgan.com/europe/merchant-services/insights/reports/italy-2020#footnote-1.

14. Za, Valentina et al. “Pandemic leaves digital laggard Italy scrambling to catch up.” Reuters, 21 March 2021. https://www.reuters.com/article/us-health-coronavirus-italy-digital-insi/pandemic-leaves-digital-laggard-italy-scrambling-to-catch-up-idUSKBN2BD0AX.

15. “The Spunta project – blockchain for Italian interbank reconciliation.” European Payments Council, 11 March 2021. https://www.europeanpaymentscouncil.eu/news-insights/insight/spunta-project-blockchain-italian-interbank-reconciliation.

16. Scampuddu, Barbara and Gian Luca Nieddu. International Tax Review, 25 January 2021. https://www.internationaltaxreview.com/article/b1q7cqqtwb2h26/italy-publishes-2021-budget-law.

17. Johnson, Miles. “Vittorio Colao vows to fix Italy’s red tape bureaucracy.” Financial Times, 16 May 2021. https://www.ft.com/content/9bef85c1-38a7-47a3-87ad-5c3b8c683bfe.

18. D’Ambrosio, Annarita. Dal 1° marzo vecchi Pin in soffitta: Spid, Cie e Cns aprono le porte a tutti i siti della Pa. Il Sole 24 Ore, 26 February 2021. https://www.ilsole24ore.com/art/dal-1marzo-vecchi-pin-soffitta-spid-cie-e-cns-aprono-porte-tutti-siti-pa-ADHvEKKB?refresh_ce=1.

19. “SPID on high speed: State of Play on Digital Identity in Italy.” Namirial, 28 January 2021. https://www.namirial.com/en/namirial-spid-digital-identity-electronic-identity-eid-italy-state-of-play-jan-2021/.


*DISCLAIMER: This information is OneSpan's interpretation of the compliance requirements as of the date of publication. Please note that not all interpretations or requirements of the applicable laws are well-settled and its application is fact- and context-specific. The information contained in this document should not be relied upon as legal advice or to determine how the law applies to your business or organization. We encourage you to seek guidance from your legal counsel with regard to law applying specifically to your business or organization and how to ensure compliance. This information is provided “as-is” and may be updated or changed without notice. OneSpan does not accept liability for the contents of these materials.

Last updated: November 2021