As you already know, regulation questions around various applications on the blockchain technology have attracted worldwide debate from different quotas — some ‘investors’ claim to have lost large chunks of money in non-existent initial coin offering projects.

Financial institutions as well are also arguing that the crypto space should be regulated as it opens up channels for unfair trading practices.

The Republic of San Marino is among the few countries that have compiled a formal document that provides a regulatory framework on these emerging technologies.

The institute responsible for innovation in this country is the San Marino Innovation which aims to create an ecosystem that supports innovation within this Republic.

The institute is headed by Sergio Mottola who brings to board over fifteen years of experience in areas such as open innovation, digital transformation, and business strategy.

In order to foster innovation, the structure of the institute provides a Scientific Committee which is leading the so-called The Blockchain Technical Table formed by more than sixteen professionals.

The Blockchain Technical Table members led by the Scientific Committee of the San Marino Innovation Institute

Some of the main market players part of the Blockchain Technical Table are IBM, Intesa, SIA, Oracle, Cisco Systems, Cerved, DNV GL, The AvantGrade Group, and different law firms such as Studio Legale Fabioano, Studio Legale Loconte & Partners and Studio Legale Gattai Minoli Agostinelli & Partners.

The Republic understands the role of disruptive technology and wants to position itself as the European Innovation Hub.

The Blockchain Decree was the first document of its kind that provides a regulatory framework on these emerging technologies. The following is a summary of what the decree provides for;

Initial token offering guidelines

The institute recognizes that there are two types of tokens; utility and investment tokens. Companies that are registered with the institute can offer these tokens to members of the public. The company have to meet these two rules:

  • The company must publish a white paper and a summary note in a non-technical language
  • The company should advertise the token and provide accurate information that does not mislead people.

San Marino Innovation can request the blockchain company to integrate all the necessary information to preserve the credibility and transparency of the system. The institute also has the powers to suspend/prohibit advertising or even selling of tokens if a company violates any of the country’s laws.

A blockchain company can either decide to open up its tokens to the general public or a select group of investors. Different regulations will apply to the two cases as indicated below;

A company that intends to offer its tokens to the public will have to draft an Information Prospectus and present it at San Marino Innovation. The documents need to consider the provisions of the European Directive “Prospectuses” and LISF.

On the other hand, non-public offers should meet the following;

  • An enriched whitepaper
  • Maximum number of investors should not exceed 150
  • Target amount should not exceed € 8 million
  • Tokens should have a denomination of 100,000 euros

Issues of tax and accounting

For both accounting and fiscal profiles, the country adopts the assimilation mechanism.

The two categories of tokens will have a different approach where utility, also known as utility tokens, will be assimilated through foreign currencies. On the other hand, the decree treats investment tokens in a similar way as compared to financial instruments, debt securities, and shares.

How to deal with trust issues on token offering

The institute can either set up a company under the laws of the land or establish a special trust. Irrespective of the choice, the body will do the following;

  • Manage the issuance of both investment and issue tokens by ensuring that it is unified and centralized;
  • Manage relations between investors and the issuers through a central platform.

Role of the Institute on ensuring transparency

The decree recognizes that manipulation is possible in such a system and thus provides a regulation that makes it hard for money laundry to take place. To make this possible, the institute requires blockchain companies to provide incorruptible verification platforms.

The San Marino system requires that those who have access to the system undergo verification and also be subject to control measures. The transparency regulation seeks to attract operators who have skills and vision which will, in turn, attract consultants and investors who will make the ecosystem complete.

The Republic of San Marino is not the first country to lay a regulatory framework on the usage of the blockchain technology and digital assets. Others who have regulations on the same include Liechtenstein, USA, Singapore, France, Switzerland, and Luxembourg.

Check the full document here: Italian version and English version.

Roxana Florea

Roxana is the co-founder of Blockchain Flash News. Passioned about blockchain and cryptocurrencies, she helps blockchain businesses increase awareness in the space by implementing strategic growth on social media.

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