Republic of San Marino Issues Regulatory Policies on Tokens, Token Offerings
San Marino officials have issued a governmental decree setting forth regulations for blockchain in business, seeking to provide regulatory certainty for ICOs.
The new decree outlines procedures for registering a blockchain-based organization with the “Istituto per l’Innovazione della Repubblica di San Marino,” or San Marino Innovation Institute.
According to the decree, blockchain-based organizations in the Republic of San Marino, the EU, or any country not classified as “high risk” and also considered relevant to the purview of San Marino legislation, may apply for registration with the institute.
The institute sets out to provide regulatory certainty, as well as supervision and enforcement of those regulations — and an anti-money laundering (AML) policy — particularly for initial token offerings (ITOs or ICOs). The institute distinguishes between utility tokens and security tokens with respect to ITOs, which are defined as follows:
”Utility tokens … shall be regarded as vouchers for the purchase of services or goods offered by the Blockchain Entity… Security tokens … shall be digital assets which represent, alternatively, depending on the underlying instrument: a) participating instruments of the issuer; b) debt securities of the issuer.”
The decree also includes tax policies for utility tokens and security tokens. Utility tokens, notably, will be treated as foreign currency for tax purposes. Security tokens, on the other hand, will be treated as participating equity instruments or debt securities, depending on the nature of the security token. Lastly, both types of token will be exempt from standard income tax for the purpose of “income generated through operations” using the tokens.
In the United States, a member of congress recently testified before the House of Representatives Ways and Means Committee. Congressman Ted Budd argued that cryptocurrencies should have the same de minimis tax exemption accorded to foreign currencies.