“The interplay between tax and financial regulations in a new digital environment”

On 7 and 8 April 2025, the conference entitled “The interplay between tax and financial regulations in a new digital environment”, organized by the Banca d'Italia in cooperation with the Global Tax Policy Center at the Institute for Austrian and International Taxation at the University of Vienna WU (Vienna University of Economics and Business) .

The event examined the challenges that the increasingly widespread adoption of new digital technologies in the financial system and the payments industry presents to regulators and authorities at the regulatory and taxation level, and the appropriateness of traditional regulatory paradigms to the fintech sector, in the light of the correct balance between promoting innovation and controlling risks.

At the opening of the conference, Deputy Director General Chiara Scotti recalled how, in a rapidly changing digital landscape, the development of new approaches to regulation and taxation is crucial to accompany innovation while safeguarding financial stability and integrity, the proper functioning of markets and payment systems, the protection of individuals' rights, and the proper fulfilment of tax obligations. She went on to emphasize that the principles of simplicity, clarity, fairness, consistency and the flexibility needed to cope with rapid change should be taken into account when designing rules, as well as possible synergies between the various regulatory areas. Finally, she recalled the crucial role played by central banks and regulators in balancing innovation with safe and efficient financial and payment services that support the economy, while providing a solid anchor for fiscal systems, and recalled the Bank of Italy's commitment in this context.

Piero Cipollone explained the role of central bank digital currencies (#CBDCs), with reference to the digital euro project. He pointed out that "in a rapidly digitalizing world, the way we pay is also changing. We are faced with a situation where cash and its benefits are not available for an increasing share of the transactions made by European citizens. The digital euro will fill this gap by providing a digital means of payment that will offer advantages that until now only cash offered."

With respect to the regulatory challenges in the digital environment, the sudden evolution of the payments system brought about by the fintech sector. While there are benefits in terms of a possible reduction in transaction costs, the entry of new players, especially those of a technological nature, leads to renewed competitive pressures. Attention has been devoted to the risks arising from so-called stablecoins, due to the lack of international coordination in their regulation. Technological innovation, new market trends, and changing consumer preferences have been the common thread running through the various interventions. Financial regulation should ensure the uniform application of rules, full consumer protection and payment market stability. In the course of the debate, the role of Central Banks in the technological development of the payments system was emphasized, as witnessed also by the participation of the Bank of Italy in the recent DLT projects developed with the French and German Central Banks.

Digital innovation in financial and payment services also poses challenges to tax systems. The need for taxation to be consistent with regulation was highlighted, while taking into account the principles of neutrality, so as not to distort investors' choices and not to create opportunities for arbitrage, and fairness, by bringing new forms of wealth within the scope of taxation. The impacts of digital assets and payment instruments on taxation systems in different countries were analysed. It remains an open question whether the canons of traditional taxation can be extended to the new digital assets or whether new models need to be found that can better capture their characteristics.

In examining the relationship between anti-money laundering regulations and taxation, the potential synergies arising from greater cooperation between authorities, at national and international level, in awareness of regulatory obstacles and resource constraints is crucial. The benefits of shared analysis between national authorities were emphasized, also leveraging the role of the new European anti-money laundering authority (AMLA - Authority for Anti-Money Laundering and Countering the Financing of Terrorism). The most recent developments of the #CARF, the new standard for the automatic exchange of information on crypto-assets currently being implemented, were then presented, underlining its potential relevance also for extra-fiscal purposes, such as the fight against money laundering, terrorism and corruption. With respect to the relationship between #tokenization in the payments and financial services sector and tax compliance, a picture of light and shadow emerged, which is constantly evolving.

#Blockchain technology, as a unique, transparent and unchangeable ledger, could be used by tax authorities as an additional tool to monitor otherwise untraced transactions. The use of smart-contracts would make it possible to programme and automate the calculation and payment of taxes. As for the negative aspects, it was emphasized that the anonymity that DLT guarantees to participants may incentivise tax evasion, both with reference to crypto-asset income (e.g. capital gains) and remuneration of a different nature (e.g. for professional services) provided in digital form. <https://www.taxnotes.com/special-reports/tax-technology/how-technology-will-shape-future-taxation-systems/2023/10/06/7hdrm>

With respect to financial instruments issued on DLT, the possible regulatory and administrative approaches were considered from a domestic perspective (through the description of the model chosen by the Italian legislature through the so-called Fintech Decree), and from a comparative perspective. In terms of taxation, emphasis was placed on the need to review traditional taxation methods such as the so-called “third party tax agent model” in favour of methodologies that take into account the new technological paradigms.

Decentralised Finance (#DeFi) poses for supervision in a regulatory and technological environment that is evolving, especially in terms of risk control, in the face of the absence of intermediaries. On the fiscal side, there is a risk that the new hybrid solutions will lead to arbitrage and double taxation. The dematerialized, decentralised, permissionless and borderless structure that characterizes, in theory, DeFi, could lead to serious obstacles in identifying the source of income, wealth-generating events and taxpayers themselves. Possible responses include the use of blockchain analytics and AI to detect abusive patterns, the withholding tax mechanism in all cases where there is an intermediary, the development of international and inter-institutional cooperation, and the implementation of a collaborative dialogue with private sector operators. Closing the proceedings, the importance of a shared and coherent approach between regulation and taxation was reiterated in order to provide certainty to operators and reap the benefits of technology, while adequately guarding against risks.