Edit Analysis - San Marino

Status & Confidence

Regulatory Status

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Executive Summary

Key Pillars

Landmark Laws

**Regulation of Technologies Based on Distributed Ledgers (DLT)** (Delegated Decree No. 2 of 2024) - Enacted: 2024-01-03
  - Updates the regulatory framework for DLTs, aligning with international standards (like MiCA). It clarifies the tax treatment of crypto assets (8% substitute tax) and reinforces registration requirements for DLT operators.
  - [Source](https://www.consigliograndeegenerale.sm)

**Provisions on Virtual Asset Custody Services** (Delegated Decree No. 111 of 2021) - Enacted: 2021-06-23
  - Regulates custody services for virtual assets, initially reserving these activities to authorized banks or financial institutions until further specific VASP regulations were enacted.
  - [Source](https://www.consigliograndeegenerale.sm)

**Blockchain Technology and High Technology Rules** (Delegated Decree No. 86 of 2019) - Enacted: 2019-05-23
  - The foundational law establishing the 'Register of Blockchain Entities', defining utility and investment tokens, and appointing San Marino Innovation as the primary technical regulator.
  - [Source](https://www.sanmarinoinnovation.com)

Considerations

Notes

Detailed Content

Detailed Explanation

Retail cryptocurrency trading is legal and explicitly regulated in San Marino, operating under a comprehensive and evolving framework. The foundational legislation is Delegated Decree No. 86 of 2019, which established the core regulatory structure for technologies based on distributed ledgers (DLT). This law created the mandatory 'Register of Blockchain Entities' and appointed the Institute for Innovation of the Republic of San Marino (San Marino Innovation) as the primary technical regulator. The framework was significantly updated by Delegated Decree No. 2 of 2024, which aligns the jurisdiction with international standards like the EU's MiCA and provides crucial tax clarity. This 2024 law explicitly states that capital gains from crypto assets are subject to a substitute tax rate of 8% on profits exceeding €2,000 per year for retail investors. The regulatory oversight is split between technical and financial authorities. San Marino Innovation manages the registration and technical certification of blockchain entities, while the Central Bank of San Marino (BCSM) is responsible for financial authorization, particularly for foreign DLT operators seeking to offer services. The Financial Intelligence Agency (AIF) enforces strict Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) compliance, aligning with EU and FATF standards. A notable restriction within this framework is outlined in Delegated Decree No. 111 of 2021, which initially reserved virtual asset custody services exclusively for authorized banks or financial institutions, creating a high barrier to entry for non-bank virtual asset service providers (VASPs). Overall, San Marino's model creates a 'sandbox-like' yet highly regulated environment by separating technical and financial oversight, requiring mandatory registration, and enforcing rigorous AML/KYC protocols.

Bullet Points

**I. Regulatory Status**
*   Retail cryptocurrency trading is *legal and explicitly regulated*.
*   The status is *Allowed-Regulated* under a comprehensive national framework.

**II. Key Regulatory Bodies**
*   **Institute for Innovation of the Republic of San Marino (San Marino Innovation)**:
    *   Primary technical regulator.
    *   Maintains the mandatory *Register of Blockchain Entities*.
*   **Central Bank of San Marino (BCSM)**:
    *   Oversees financial authorization and compliance.
    *   Grants authorization for *foreign DLT operators* to operate legally.
*   **Financial Intelligence Agency (AIF)**:
    *   Enforces *Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT)* obligations.
    *   Aligns with EU and FATF standards.

**III. Important Legislation**
*   **Delegated Decree No. 2 of 2024 (Regulation of Technologies Based on Distributed Ledgers)**:
    *   Enacted on 2024-01-03.
    *   Updates the DLT framework, aligning with international standards (like MiCA).
    *   Clarifies the *8% substitute tax* on crypto capital gains exceeding €2,000 annually.
    *   Reinforces registration requirements for DLT operators.
*   **Delegated Decree No. 111 of 2021 (Provisions on Virtual Asset Custody Services)**:
    *   Enacted on 2021-06-23.
    *   Initially reserved *custody services for virtual assets* to authorized banks or financial institutions.
*   **Delegated Decree No. 86 of 2019 (Blockchain Technology and High Technology Rules)**:
    *   Enacted on 2019-05-23.
    *   Foundational law establishing the *Register of Blockchain Entities*.
    *   Defines utility and investment tokens.
    *   Appoints San Marino Innovation as the primary technical regulator.

**IV. Compliance Requirements**
*   Mandatory registration on the *Register of Blockchain Entities* with San Marino Innovation.
*   Strict *AML/KYC compliance* enforced by the AIF.
*   For foreign operators, authorization from the *Central Bank of San Marino (BCSM)* is required.
*   Retail investors must declare and pay *capital gains tax* on realized profits.

**V. Notable Restrictions or Limitations**
*   *Custody services* have historically been restricted to authorized banks, creating a *high barrier to entry* for non-bank Virtual Asset Service Providers (VASPs).
*   Foreign DLT operators cannot operate without specific authorization from the Central Bank.

**VI. Recent Developments or Notes**
*   The 2024 update (Delegated Decree No. 2) provides *significant tax clarity* for retail investors, establishing a clear 8% substitute tax rate.
*   San Marino's approach is unique in *splitting technical certification (Innovation Institute) from financial authorization (Central Bank)*.
*   This creates a *'sandbox-like' environment that is nonetheless highly regulated*.

Full Analysis Report

Complete markdown report for this analysis

San Marino has established itself as a fully regulated jurisdiction for cryptocurrency through a series of legislative decrees starting in 2019. The regulatory framework is a dual system where 'San Marino Innovation' (a state-owned institute) handles the technical certification and registration of blockchain entities, while the Central Bank of San Marino (BCSM) and the Financial Intelligence Agency (AIF) retain authority over financial services and anti-money laundering compliance. This structure allows for the legal operation of blockchain businesses while ensuring strict financial oversight.

The most recent significant update, Delegated Decree No. 2 of 2024, modernized the framework to align closer with the European Union's MiCA regulation. It introduced clear definitions for Distributed Ledger Technology (DLT) operators and solidified the tax regime for retail investors. Under this decree, individuals are subject to an 8% substitute tax on capital gains realized from crypto assets, provided the gains exceed a €2,000 annual threshold. This explicit taxation confirms the legality of retail holding and trading.

Operational requirements for service providers are stringent. Delegated Decree No. 111 of 2021 initially restricted the custody of virtual assets to authorized banks, a measure designed to ensure high security and solvency standards. While the framework allows for innovation, it imposes high barriers to entry for standalone crypto exchanges compared to other jurisdictions. Foreign entities wishing to offer services to San Marino residents generally require authorization from the Central Bank, ensuring that the domestic market is not exposed to unregulated offshore risks.

Enforcement is active, with the AIF monitoring for suspicious transactions and the Central Bank issuing periodic warnings about the risks of volatility and lack of consumer protection in unregulated assets. Despite these warnings, the government actively promotes San Marino as a 'Blockchain Hub,' offering tax incentives for high-tech companies that register and establish a physical presence in the country.

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