Does the Republic of San Marino’s legal framework for distributed ledger technology (DLT) make it a haven for blockchain companies?
Despite only having a population of circa 33,000, the Republic of San Marino is on a mission to establish itself as the first choice among new blockchain investors and start-up businesses.
In recent news, they’ve issued a decree called “Blockchain Technology Rules for Businesses”, which focuses on introducing a more transparent, clearer and simpler regulation for blockchain technology.
This step follows the growing demand for jobs from native citizens. It’s believed that through this initiative, the Republic will try to attract more investments to create opportunities for the unemployed and help give the local economy a welcome boost.
Creating this formal document with a regulatory framework makes the Republic of San Marino one of the very few countries in the EU to do so in relation to the emergence of blockchain technology.
However, does this make it the best place to do business? Let’s explore.
A summary of the decree
Before answering the underlining question of whether the Republic is a blockchain haven or not, it’s important to analyse the contents of the decree itself.
Some of the most notable advantages include:
- Anti-money laundering safeguards provide a more transparent and optimum level of system protection.
- It offers a solid and non-alterable legal framework.
- There will be more regulatory certainty which is governed.
The Republic of San Marino decree covers tax incentives too – including the introduction of an easier taxation regime.
The Republic has formally recognised two types of tokens, utility and investment. If a business offers these to members of the public, their annual income will be tax exempt. Although, the company must meet two very specific rules:
- They must publish a white paper and a summary note in simple (non-technical) language.
- They need to advertise the token and only provide non-misleading information about it.
If a company wishes to publically offer investment tokens, they must also produce a prospectus which is prepared in line with the stipulations of the LISF and the European Directive “Prospectuses”. It must then be presented at the San Marino Innovation.
In contrast, companies who choose not to publically offer their investment tokens only need to produce an enriched white paper and a summary note.
Better AML procedures
There’s also an added emphasis on implementing stronger AML and anti-terrorism funding procedures too, with constant controls and verification methods required.
The managing partner of Loconte & Partners, Prof. Avv. Stefano Loconte says: “The decree places itself at the highest levels of alert with reference to AML procedures because not only does it expressly provide that all transactions end up in the field of the relevant legislation, but all subjects and all operations are subject to so-called reinforced verification, then that particular procedure within the AML discipline.”
“In addition, only those individuals belonging to jurisdictions that ensure quality levels at least equal to those of the Republic, are expected to deal with this world of San Marino. If the country of a company that believes to make an operation to the Republic does not have an anti-money laundering discipline in line with the San Marino’s standards, it will not be able to have access,” he concluded.
Just how significant is the Republic’s blockchain decree?
There’s no question that this decree will certainly generate some interest among blockchain investors and start-ups. The Republic’s stance on taxation paired with the more transparent and stronger push towards stamping out high-profile money laundering and terrorism funding cases is definitely a huge plus.
However, it’s worth noting that the Republic of San Marino isn’t the first country to issue a regulatory framework on the usage of blockchain technology.
Most notably, Switzerland and Luxembourg. Although, it would be foolish to discard the array of benefits Estonia brings to the table as well.
Making the right decision boils down to a number of factors, including what type of business you have, what coins you want to offer and how you want to scale the company moving forward.
Nonetheless, the Republic of San Marino is definitely worth considering.
If you need help choosing the right country for your blockchain company, get in touch with our expert team here at Blockchain ConsultUs today.