tl;dr
Italy’s central bank, Banca d'Italia, has reiterated concerns about the growing influence of crypto in traditional finance, warning it poses potential risks to financial stability due to volatility, regulatory gaps, and market contagion. The bank highlighted increased digital asset prices following ...
Italy’s central bank, Banca d'Italia, has issued a stark warning about the growing integration of cryptocurrencies with traditional financial systems, noting this trend poses systemic risks to overall financial stability. The bank highlights concerns about volatility, regulatory gaps, and the potential for disruptions to spread across markets due to crypto’s expanding footprint.
Following the pro-crypto stance of the U.S. administration under Donald Trump, digital asset prices surged, deepening the entanglement between government, traditional finance, and crypto sectors. This increased integration, particularly involving firms based in the U.S., raises fears of systemic vulnerabilities and governance issues, as many companies holding large Bitcoin positions lack stringent oversight, potentially creating conflicts of interest.
In particular, the Bank of Italy worries about the dominance of dollar-backed stablecoins such as Tether (USDT) and Circle’s USDC. A massive redemption run on these stablecoins could trigger a cascade of selling in U.S. government bonds, disrupting global markets and threatening EU monetary sovereignty by undermining euro-area payment systems.
Despite the cautionary stance of the central bank, Italy’s largest banking group, Intesa Sanpaolo, is boldly investing in cryptocurrency and blockchain projects. The bank made a notable move by purchasing 11 bitcoins worth approximately €1 million and supporting Italy’s first blockchain bond issuance. Intesa Sanpaolo has also integrated spot crypto trading into its operations, signaling a robust commitment to digital assets.
Meanwhile, the Bank of Italy continues to cautiously support blockchain technology development, endorsing a permissioned consensus protocol connected to Bitcoin. Efforts include enhancing privacy for validators and exploring the creation of a central bank digital ledger, reflecting a measured but forward-looking approach to crypto innovation.