The Digital Financial Instruments Law

Law Decree no. 25 of 17 March 2023, setting forth urgent provisions concerning the issuance and transfer of tokenised financial instruments, including bonds and shares (ie financial instruments in a digital form, ie issued by using the distributed ledger technology or blockchain), is effective as of 18 March 2023 (the Digital Financial Instruments Law or DFIL).

The DFIL is an epoch-making piece of legislation as designed to allow: (i) the issuance and transfer of financial instruments in digital form; and (ii) the applicability of the Pilot Regime in Italy.

In particular before the DFIL, only two alternative regimes were available to issue and transfer financial instruments under Italian law: (i) the regime of the Italian Civil Code applicable to securities in paper form; or, as an alternative (ii) the regime of the Italian Financial Services Act, applicable to dematerialised securities, ie to securities issued in book-entry form. In this respect, under a certain interpretation, tokenised securities cannot be subsumed under the regime of form and circulation provided by the Italian Civil Code or by the Italian Financial Services Act and, as such, an ad hoc legislation was deemed necessary.

As such, the Digital Financial Instruments Law, by enabling the issuance and transfer of tokenised financial instruments, has introduced a third regime with the aim of creating a legal “bridge” to the Pilot Regime provided by the new European digital finance package, supporting the legal innovation and the new technologies. Thus, upon the publication of the DFIL, the Italian jurisdiction prepares to start the experimentation of the Pilot sandbox and to test a brand new regime to issue and transfer tokenised financial instruments exclusively relying on digital applications and infrastructures.