Italy: Localization of Quantitative Balancing in the Marche Region

Localization of Quantitative Balancing in the Marche Region: A Pilot Project

Overview: Why Marche?

The Marche region, located in central Italy, is an ideal candidate for a QB pilot due to its manageable size (population ~1.5 million, GDP ~€42 billion in 2024), diverse economy (SMEs in manufacturing, agriculture, tourism), and moderate public debt exposure within Italy’s €2.8 trillion national total. A PPP between the Marche Regional Government and a private company (e.g., "MarcheCo") issuing a stablecoin ("MarcheCoin") can test QB’s core principles—state-backed money creation, deposit segregation, and debt offset—while respecting Italy’s eurozone constraints. This pilot would use blockchain for transparency and tie the stablecoin to regional tax acceptance, offering a controlled environment before national scaling.

Objectives

1. Regional Stablecoin: Launch "MarcheCoin" as a euro-pegged digital currency (1 MarcheCoin = 1 EUR) via PPP, accepted for regional taxes.
2. Debt Offset: Reduce Marche’s share of public debt (~€10 billion, estimated as 0.36% of Italy’s €2.8T, proportional to GDP contribution).
3. QB Testing: Pilot QB’s transparency and reflux mechanisms, preparing for broader adoption.

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Phase 1: MarcheCoin Pilot Project (2025-2026)

Duration: 18 months (March 2025 - August 2026)
Objective: Test QB with a PPP-issued stablecoin in Marche.

Details:

• Execution: MarcheCo, a private entity partnered with the Marche Regional Government, issues 500 million "MarcheCoin" (1 MarcheCoin = 1 EUR) under a PPP agreement. The stablecoin is accepted by the Regione Marche for regional taxes (e.g., IRAP, addizionale regionale IRPEF) and tracked on a public blockchain (e.g., Polygon).
• Accounting:
  • MarcheCo: Assets = "Creation of 500M MarcheCoin"; Liabilities = "Debt of 500M from seigniorage to Regione Marche."
  • Regione Marche: Offsets €10B regional debt by 500M euros (5%), recording MarcheCo’s debt as an asset, with national Treasury consent.
• Reflux: MarcheCo pays 50M euro tranches annually over 10 years as MarcheCoin is redeemed (e.g., for taxes).
• Scale: 500M euros (~1.2% of Marche GDP, €42B; 0.03% of Italy’s M2, €1.5T).
• PPP Structure: Regione Marche provides tax acceptance and regulatory support; MarcheCo funds issuance and blockchain infrastructure, splitting seigniorage revenue (e.g., 70% to region, 30% to MarcheCo).

Legal Modifications:

1. Regional Autonomy (Italian Constitution, Article 117)
   • Current: Regions have fiscal autonomy but no currency authority (eurozone exclusivity).
   • Change: Leverage Article 117(3) (financial autonomy) via a regional decree: "Regione Marche may partner with private entities to issue digital payment instruments accepted for regional taxes, effective June 2025, with national approval."
   • Rationale: Frames MarcheCoin as a fiscal tool, not a currency, avoiding ECB conflict.
2. Legge Regionale (Regional Tax Law)
   • Current: Taxes collected in euros via Agenzia delle Entrate.
   • Change: Amend Legge Regionale 10/1997 (Taxation): "Regione Marche accepts MarcheCoin for regional taxes at 1:1 parity with EUR, effective July 2025."
   • Rationale: Ensures demand, aligning with QB’s tax-backed model.
3. Sandbox Approval (National Level)
   • Current: Decreto Crescita (DL 34/2019) allows fintech sandboxes.
   • Change: National fast-track via Ministry of Economy and Finance (MEF): "MarcheCoin pilot approved under sandbox, with ECB consultation, capped at 500M euros."
   • Rationale: Secures legal cover within eurozone rules.

Outcomes:

• Debt reduction: €500M (~5% of Marche’s €10B debt).
• Economic stimulus: €500M (~1.2% GDP) boosts SMEs (e.g., footwear, tourism).
• Transparency: Blockchain curbs tax evasion (~€1B gap in Marche, proportional to Italy’s €83B).

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Phase 2: QB Expansion in Marche Banking (2026-2028)

Duration: 2 years (September 2026 - August 2028)
Objective: Integrate QB into Marche banks, scaling MarcheCoin and segregating deposits.

Details:

• Expansion: Local banks (e.g., Banca Marche successors, UBI Banca) adopt QB, issuing MarcheCoin for loans with Treasury seigniorage credits. Scale to €2B (4.8% of Marche GDP).
• Deposit Segregation: Offer "Marche Safe Accounts" (regular deposits, customer-owned) vs. "Marche Lending Accounts" (irregular, bank-owned).
• Accounting: Banks record loan-created MarcheCoin as liabilities to Regione Marche; tranches of €200M/year repay over 10 years.

Legal Modifications:

1. Testo Unico Bancario (Legislative Decree 385/1993)
   • Current: Article 14 allows deposit-taking and lending; no segregation.
   • Change: Add Article 14-bis (via national amendment): "Banks in QB pilot regions may segregate deposits as regular contracts, owned by customers, and register seigniorage credits to regional authorities, effective January 2027."
   • Rationale: Enables deposit ownership shift and QB compliance in Marche banks.
2. Codice Civile (Article 1834)
   • Current: Banks own deposits under irregular contracts.
   • Change: Amend nationally: "Deposits in QB regions may be segregated at customer option, remaining customer property and unavailable for lending, effective July 2026."
   • Rationale: Transforms irregular to regular deposits, starting in Marche.
3. Regional Banking Incentives
   • Change: Regione Marche decree: "Banks adopting QB receive 0.5% reduction in IRAP for 5 years, starting 2027."
   • Rationale: Encourages local bank participation.

Outcomes:

• Debt reduction: €2B (~20% of €10B).
• Banking shift: 10% of Marche deposits segregated (€1B of €10B total deposits, estimated).
• Scalability: Model ready for other regions if ECB approves.

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Phase 3: Full QB Regional Adoption (2028-2030)

Duration: 2 years (September 2028 - August 2030)
Objective: Convert Marche’s financial system to QB, clearing regional debt.

Details:

• Transition: Convert Marche’s M2 contribution (~€10B, 0.67% of Italy’s €1.5T) to QB MarcheCoin, all deposits optionally segregated.
• Mechanics: Banks issue all new money under QB; Regione Marche offsets remaining €8B debt with €10B credits, tranches of €1B/year beyond 2030.
• Ownership: Default to Marche Safe Accounts unless opted out.

Legal Modifications:

1. Regional Statute (Statuto Regione Marche)
   • Current: No provision for monetary tools.
   • Change: Amend Article 4 (Economic Development): "Regione Marche may fully adopt QB frameworks for financial transactions by July 2029, with national consent."
   • Rationale: Locks in regional QB adoption.
2. National Coordination (DLgs 267/2000 - TUEL)
   • Change: Add Article 3-bis: "Regions piloting QB may integrate financial systems with national debt strategies, approved by MEF by 2028."
   • Rationale: Aligns Marche with Italy’s €2.8T debt framework.
3. ECB Agreement
   • Change: Negotiate ECB waiver: "MarcheCoin recognized as a fiscal tool, not euro competitor, capped at €10B by 2030."
   • Rationale: Avoids Article 127 TFEU conflict.

Outcomes:

• Debt cleared: €10B offset, surplus funds regional projects (e.g., post-2016 earthquake recovery).
• Ownership: ~80% of €10B deposits customer-owned (assuming 20% opt for lending).
• Model export: Blueprint for other regions (e.g., Umbria, Lazio).

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Legal Feasibility

• Regional Powers: Article 117 allows fiscal experimentation; MarcheCoin as a tax tool skirts eurozone monetary exclusivity.
• National Support: MEF and Banca d’Italia must approve debt offsets and banking changes, feasible via sandbox and PPP precedent (e.g., Italy’s smart city PPPs).
• ECB: 500M-€10B scale (~0.67% of eurozone M2) is small enough to test without treaty breaches, if framed as fiscal innovation.

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Benefits and Challenges

Benefits:

• Debt Relief: Clears €10B, freeing ~€500M/year in interest (assuming 5% yield).
• Economic Boost: €2B in Phase 2 (~5% GDP) aids SMEs, tourism (e.g., Urbino).
• Transparency: Blockchain curbs evasion (~€1B gap), boosting revenue (€2B target).

Challenges:

• ECB Pushback: €10B may trigger scrutiny; mitigated by sandbox and ECB dialogue.
• Bank Resistance: Local banks may resist segregation; IRAP cuts incentivize.
• Scale Limits: Marche’s small size caps impact; success hinges on national buy-in.

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Conclusion

Localizing QB in Marche via a PPP-issued MarcheCoin pilot offers a controlled testbed for Italy. Starting with 500M euros in 2025, scaling to banking integration by 2028, and fully adopting QB by 2030 clears regional debt and proves the model. Legal tweaks to regional tax laws, national banking codes, and ECB negotiations make it feasible, leveraging Marche’s autonomy and Italy’s fintech push. Success could spark a domino effect across Italy’s 20 regions, reimagining eurozone finance one step at a time.

Below is an analysis of the compatibility of the Quantitative Balancing (QB) proposal, specifically the MarcheCoin pilot project in the Marche region of Italy, with the Markets in Crypto-Assets Regulation (MiCA), Regulation (EU) 2023/1114. MiCA, effective from June 29, 2023, with full application by December 30, 2024 (and stablecoin rules from June 30, 2024), establishes a harmonized EU framework for crypto-assets. This analysis assesses how the MarcheCoin pilot aligns with MiCA’s definitions, requirements, and constraints, focusing on its classification, issuance, and operational framework within the proposed Public-Private Partnership (PPP).

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Compatibility Analysis: Quantitative Balancing (MarcheCoin Pilot) with MiCA (EU) 2023/1114

1. Classification of MarcheCoin under MiCA

MiCA categorizes crypto-assets into three types: Asset-Referenced Tokens (ARTs), Electronic Money Tokens (EMTs), and other crypto-assets (e.g., utility tokens). MarcheCoin, as a stablecoin pegged 1:1 to the euro and issued by MarcheCo (a private entity in a PPP with Regione Marche), must be classified to determine applicable rules.

• Asset-Referenced Token (ART):
  • Definition (Article 3(1)(6)): ARTs maintain stable value by referencing multiple fiat currencies, commodities, or crypto-assets.
  • MarcheCoin Fit: Pegged solely to the euro, MarcheCoin does not reference multiple assets, suggesting it may not qualify as an ART.
• Electronic Money Token (EMT):
  • Definition (Article 3(1)(7)): EMTs maintain stable value by referencing one fiat currency (legal tender) and are intended as a means of payment.
  • MarcheCoin Fit: Pegged 1:1 to the euro, accepted for regional taxes, and designed for transactions within Marche, MarcheCoin aligns closely with EMT characteristics.
• Other Crypto-Asset:
  • Definition: Covers tokens not qualifying as ARTs or EMTs (e.g., Bitcoin, utility tokens).
  • MarcheCoin Fit: Less applicable, given its euro peg and payment function.

Verdict: MarcheCoin is best classified as an EMT due to its single-currency (euro) peg and payment utility. This classification triggers specific MiCA requirements under Title IV, effective since June 30, 2024.

2. Issuance and Authorization Requirements

MiCA imposes strict rules on EMT issuers, which MarcheCo must comply with:

• Authorization (Article 48):
  • EMT issuers must be authorized as credit institutions or electronic money institutions (EMIs) under Directive 2006/48/EC or 2009/110/EC, unless exempt (e.g., small-scale EMTs under Article 54).
  • Compatibility: MarcheCo, as a private entity, is unlikely a credit institution or EMI. To issue MarcheCoin legally, it must obtain EMI authorization from Banca d’Italia or partner with an authorized entity, a significant hurdle for the PPP.
• White Paper (Article 51):
  • Issuers must draft and notify a crypto-asset white paper to the competent authority (Banca d’Italia), detailing token functionality, risks, and reserves, with no prior approval needed unless deemed "significant" (Article 58).
  • Compatibility: The pilot’s 500M euro issuance (~0.03% of Italy’s M2) is below MiCA’s "significant" threshold (e.g., 5M holders or €1B value), so MarcheCo can notify without approval, aligning with Phase 1’s timeline (2025-2026).
• Reserve Requirements (Article 48(2)):
  • EMTs require full liquid asset backing (e.g., euro deposits or safe investments), held in custody and audited regularly.
  • Compatibility: QB’s design, where MarcheCoin is backed by tax acceptance rather than liquid reserves, conflicts with MiCA. The Treasury offset (debt reduction) isn’t a reserve asset under MiCA, necessitating a funding mechanism (e.g., MarcheCo pre-funding with euros) to comply.

Assessment: Authorization and reserve rules pose challenges. MarcheCo must either become an EMI or adjust QB to include euro reserves, deviating from the pure tax-backed model.

3. Deposit Segregation and QB Mechanics

QB’s core innovation—segregating deposits as regular contracts owned by customers—interacts with MiCA’s framework for crypto-asset service providers (CASPs) and banking rules:

• CASP Relevance (Title V):
  • If Marche banks offer custody or trading of MarcheCoin, they become CASPs, requiring authorization under Article 62 (effective December 30, 2024).
  • Compatibility: Phase 2 (2026-2028) integrates QB into banks, aligning with MiCA’s CASP regime. Segregated "Marche Safe Accounts" fit MiCA’s custody rules (Article 75), requiring client asset separation, enhancing compliance.
• Banking Conflict:
  • QB’s deposit segregation (Article 1834, Codice Civile amendment) contrasts with traditional euro deposits under EU banking law (Directive 2014/49/EU), but MarcheCoin, as an EMT, operates outside this scope, reducing friction.
• Legal Tender: QB aims to make bank money legal tender, but MiCA doesn’t grant EMTs legal tender status—only acceptance for taxes aligns with QB’s design, not requiring MiCA amendment.

Assessment: Segregation aligns with MiCA’s custody standards for CASPs, but the EMT classification limits MarcheCoin’s legal tender ambition within the eurozone framework.

4. Blockchain and Transparency

• MiCA Fit: MiCA encourages transparency (e.g., Article 76 for CASPs) and doesn’t prohibit blockchain use. MarcheCoin’s blockchain tracking enhances compliance with MiCA’s anti-money laundering (AML) and market abuse rules (Title VI), leveraging Regulation (EU) 2023/1113’s fund transfer traceability requirements.
• Compatibility: Fully compatible—blockchain strengthens QB’s transparency claims, aiding tax evasion prevention (€1B gap target in Marche).

5. Eurozone and ECB Constraints

• Article 127 TFEU: The ECB has exclusive euro issuance rights. MiCA (Recital 8) clarifies EMTs aren’t legal tender but coexist as private payment tools.
• Compatibility: MarcheCoin’s small scale (500M-€10B, 0.67% of eurozone M2) and fiscal framing (tax acceptance, debt offset) minimize ECB conflict. The sandbox approach (DL 34/2019) and ECB consultation (Phase 1) further align with MiCA’s transitional provisions (Article 143), allowing experimentation until December 30, 2024.

Assessment: Framing MarcheCoin as a fiscal tool under regional autonomy (Article 117, Italian Constitution) and capping its scale ensures compatibility, but ECB approval remains critical.

6. Public-Private Partnership (PPP)

• MiCA Fit: MiCA doesn’t explicitly address PPPs, focusing on private issuers (Titles III-IV) and CASPs (Title V). Regione Marche’s role (tax acceptance, debt offset) doesn’t make it an issuer, leaving MarcheCo as the regulated entity.
• Compatibility: The PPP fits MiCA if MarcheCo meets EMI requirements. Revenue-sharing (e.g., 70% region, 30% MarcheCo) must comply with governance rules (Article 48(5)), ensuring no conflict of interest.

Assessment: Structurally compatible, but MarcheCo’s authorization is the linchpin.

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Key Compatibility Findings

Aspect	MiCA Requirement	QB Compatibility	Adjustments Needed
Classification	EMT (euro-pegged, payment-focused)	Fits as EMT	None
Authorization	EMI or credit institution license	MarcheCo lacks EMI status	Obtain EMI license or partner with one
Reserves	Full liquid euro backing	Tax-backed, not liquid	Fund with euro reserves
White Paper	Notify Banca d’Italia, no approval for small EMTs	Aligns with 500M scale	None
Segregation	CASP custody rules apply	Safe Accounts comply	None
Legal Tender	EMTs not legal tender	Tax acceptance aligns, not full tender	Clarify scope within QB
Blockchain	Transparency encouraged	Enhances compliance	None
ECB/Eurozone	No euro issuance conflict	Small scale, fiscal tool mitigates	ECB dialogue via sandbox

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Conclusion: Compatibility with Adjustments

The MarcheCoin QB pilot is largely compatible with MiCA if classified as an EMT and framed as a fiscal experiment under Italy’s sandbox (DL 34/2019). Key adjustments include:

1. EMI Authorization: MarcheCo must secure EMI status or partner with an authorized entity (e.g., a local bank), feasible by mid-2025 for Phase 1.
2. Reserve Funding: Shift from pure tax backing to euro reserves (e.g., €500M deposit in Phase 1), aligning with MiCA’s EMT rules while preserving QB’s debt offset logic via tranch repayments.
3. ECB Negotiation: Secure ECB acquiescence by emphasizing MarcheCoin’s limited scope (€10B max, 0.67% of eurozone M2) and regional focus, avoiding monetary policy disruption.

With these tweaks, the pilot complies with MiCA’s Title IV (effective June 30, 2024) and CASP rules (December 30, 2024), leveraging blockchain for AML/market abuse compliance (Titles VI, Regulation 1113/2023). The PPP structure enhances feasibility, balancing private innovation with public oversight. This localized QB test in Marche could pave the way for broader Italian adoption, proving MiCA’s flexibility for regional experimentation.