San Marino -- Stablecoin Regulations Regulatory Overview

San Marino has established a progressive regulatory framework for digital assets, including stablecoins, primarily through its Delegated Law on Distributed Ledger Technologies (DLT) and subsequent implementing decrees by the Banca Centrale della Repubblica di San Marino (BCRSM).

Here’s a breakdown of the regulatory framework for stablecoins in San Marino:

Key Legislation and Regulatory References

1. Legge Delegata n. 129 del 2019 – Legge per le tecnologie a registro distribuito (Delegated Law No. 129 of 2019 – Law for Distributed Ledger Technologies - DLT Law): This is the foundational law that provides the legal framework for DLT-based activities, defines types of tokens, and delegates regulatory power to the BCRSM for DLTs applied to financial instruments.

   • Link to Law No. 129/2019 (often found on government or BCRSM legal archives, search for "Legge Delegata 129/2019 San Marino DLT")

2. Decreto della Banca Centrale n. 2 del 2020 – Regolamento attuativo della Legge Delegata n. 129 del 2019 in materia di emissione di strumenti finanziari tramite DLT (BCRSM Decree No. 2 of 2020 – Implementing Regulation of Delegated Law No. 129 of 2019 concerning the issuance of financial instruments via DLT): This decree, issued by the Central Bank, specifically details the rules for issuing financial instruments, including security tokens and potentially certain types of stablecoins, on DLTs.

   • Link to BCRSM Decree No. 2/2020 (often found in the "Normativa" section of the BCRSM website, search for "Decreto Banca Centrale 2/2020 DLT")

3. BCRSM Circulars: Various circulars further specify requirements related to AML/CFT, operational aspects, and licensing for DLT operators.

   • Example: Circolare n. 1/2020 – Disposizioni in materia di prevenzione e contrasto del riciclaggio e del finanziamento del terrorismo per gli operatori DLT (Circular No. 1/2020 – Provisions concerning the prevention and combating of money laundering and terrorist financing for DLT operators).
   • Link to BCRSM Circulars

Regulatory Framework Details

Classification of Stablecoins

San Marino's DLT Law and BCRSM decrees do not explicitly define "stablecoin" as a distinct legal category but classify tokens based on their underlying nature and function. Stablecoins would generally fall into one of the following, depending on their design:

• E-money Tokens/Payment Tokens:
  • If a stablecoin is designed to maintain a stable value, is denominated in fiat currency (e.g., EUR, USD), and is redeemable at par by the issuer, it would likely be classified as e-money if issued by an authorized entity or used as a payment instrument. Issuers of such tokens would be subject to e-money regulations, requiring a specific license from the BCRSM. The BCRSM Decree No. 2/2020, referring to financial instruments, clarifies that where DLTs are used for activities falling under existing financial sector laws (e.g., e-money, payment services), those specific laws apply.
• Security Tokens:
  • If a stablecoin represents a share in a basket of assets, a debt instrument, or ownership of specific underlying assets (e.g., real estate, commodities), it would likely be classified as a security token under Law 129/2019. The issuance of security tokens is regulated by BCRSM Decree No. 2/2020, which sets requirements for public offerings, whitepapers, and investor protection.
• Utility Tokens:
  • If a stablecoin has no direct claim on fiat or underlying assets but provides access to a specific network or service, it could, in rare cases, be considered a utility token. However, most stablecoins, by their nature, aim to maintain a stable value against an external reference, making this classification less common for asset-backed or fiat-backed stablecoins.

The classification is determined on a case-by-case basis by the BCRSM.

Reserve Requirements

• For E-money Tokens: If a stablecoin is classified as e-money, strict reserve requirements apply, consistent with EU e-money directives. This typically means:
  • Full Backing: The issuer must hold assets equivalent to the value of the e-money in circulation.
  • Segregation: These assets must be segregated from the issuer's operational funds and held in secure accounts (e.g., credit institutions).
  • Custody: Rules on the safe custody of these reserve assets are stipulated.
• For Security Tokens: For stablecoins classified as security tokens, the underlying assets backing the token must be clearly identified, their custody regulated, and their value verifiable as per the terms of the whitepaper and BCRSM requirements. While not a "reserve" in the e-money sense, the integrity and management of the backing assets are paramount.

Issuer Licensing

• Authorized Operator for Distributed Ledger Technologies (ODLT): Law 129/2019 introduced the concept of an "Authorized Operator for Distributed Ledger Technologies" (ODLT). All entities wishing to operate DLT-based activities in San Marino that involve regulated financial instruments or services must obtain authorization from the BCRSM.
• Specific Financial Licenses: Beyond the ODLT authorization, an issuer of stablecoins would need to obtain specific financial licenses depending on the classification of their token:
  • E-money Institution License: For stablecoins classified as e-money.
  • Investment Firm/Financial Institution License: For activities related to security tokens (e.g., issuance, trading platforms).
• The licensing process is rigorous, involving assessments of capital requirements, governance structures, fit and proper criteria for management, business plans, internal controls, and AML/CFT compliance.

Redemption Rights

• For E-money Tokens: If a stablecoin is classified as e-money, holders typically have a statutory right to redeem their tokens at par value, at any time, for the underlying fiat currency from the issuer, without undue delay. This is a fundamental principle of e-money regulation.
• For Security Tokens: For stablecoins classified as security tokens, redemption rights would be governed by the terms specified in the whitepaper or offering document, consistent with the nature of the underlying security.

Algorithmic Stablecoin Rules

San Marino's DLT Law and current BCRSM decrees do not have specific provisions explicitly addressing "algorithmic stablecoins." However, given the framework:

• Lack of Direct Fiat/Asset Backing: Algorithmic stablecoins, which rely on software algorithms and market incentives rather than direct fiat or collateral backing to maintain their peg, would not likely qualify as e-money tokens under San Marino's framework due to the absence of the required full and segregated fiat reserves.
• Classification Challenges: Their classification would be challenging. They might be considered complex, high-risk digital assets.
  • If they derive value from specific underlying mechanisms or a pool of crypto assets, they could potentially be viewed through the lens of security tokens, requiring detailed disclosure of the mechanism, risks, and potentially specific authorizations.
  • However, if they offer no direct claim or represent no direct share in assets, they might fall outside specific financial instrument regulation unless new categories are introduced or they are deemed a form of unregulated, speculative digital asset.
• Regulatory Scrutiny: Any proposed issuance of an algorithmic stablecoin would face intense scrutiny from the BCRSM due to inherent volatility and systemic risks. It is unlikely that such tokens would be authorized for public offering as a regulated financial instrument without significant policy development.

CBDC Interaction

San Marino has been proactive in exploring digital finance and DLTs, including initiatives related to its own digital currency:

• Project Titan and San Marino Token (SMT): San Marino initiated "Project Titan" in 2019 to explore a DLT-based financial ecosystem. This included a plan for a "San Marino Token (SMT)," which was envisioned as a utility token convertible into fiat, with a portion of the revenue going to the state. While not a direct CBDC (as it wasn't a central bank liability), it showed the state's interest in DLT-based digital currencies and could be seen as a precursor or a private-sector stablecoin initiative with government backing.
• Enabling Framework: The DLT Law and the BCRSM's decrees provide a robust legal and regulatory sandbox-like environment that could facilitate the development or interaction with a future Central Bank Digital Currency (CBDC). The existing infrastructure for licensing DLT operators, defining financial instruments on DLT, and strong AML/CFT controls would be highly relevant for any CBDC implementation.
• No Formal CBDC Launched: As of now, San Marino has not launched a formal, fully-fledged central bank-issued CBDC. However, its innovative DLT framework positions it as a potential early adopter or experimenter in the CBDC space, allowing for seamless integration if such a decision is made in the future.

In summary, San Marino offers a clear, although nuanced, regulatory pathway for stablecoins, largely through classifying them within existing financial instrument categories like e-money or securities. The BCRSM plays a central role in licensing, supervision, and interpreting the application of the DLT Law to specific stablecoin designs.

Disclaimer: This information is for general informational purposes only and does not constitute legal or financial advice. The regulatory landscape for digital assets is rapidly evolving, and specific legal counsel should be sought for any particular situation.