The primary banking authority in Italy has emphasized the importance of implementing a robust and risk-based regulatory framework for stablecoins. The aim is to prevent a potential worst-case scenario of a destabilizing “run” on these digital assets. In its latest report, titled “Markets, Infrastructures and Payment Systems” for June, the central bank specifically urges regulators to enforce comparable financial conduct standards on stablecoin issuers within the industry.
The bank highlights the significant harm inflicted upon consumers in the cryptocurrency sector, considering the rise of cryptocurrencies and the inherent volatility witnessed in unregulated cycles. It particularly emphasizes the need for regulatory attention towards stablecoin issuers, given their close ties with decentralized finance (DeFi). The objective is to prevent issuer “runs” and reduce the fragility of the DeFi ecosystem, as stablecoins play an influential role within decentralized finance.
The bank also stresses the necessity for synchronized policy interventions on stablecoins and DeFi, recognizing that the widespread adoption of stablecoins is likely to fuel new waves of DeFi innovation and deepen the interconnection between traditional and decentralized financial systems. This stance aims to prompt lawmakers to address the regulatory challenges posed by assets that do not fit into existing classification frameworks, such as collateralized stablecoins, native tokens of programmable blockchains, utility tokens, and protocols’ governance tokens.
Furthermore, the bank highlights the need for international cooperation, acknowledging the borderless nature of cryptocurrencies. It emphasizes the importance of flexible and scalable arrangements between countries to effectively regulate the crypto sphere, considering its distinct characteristics compared to traditional financial systems. While specific examples of these arrangements are not provided, the bank emphasizes the significance of developing collaborative solutions.
The bank also differentiates between crypto assets that serve customers’ financial needs and those with non-financial use cases. It recognizes the diverse applications of blockchain technology beyond traditional finance, such as decentralized identification, real estate, supply chain management, voting, and carbon credits. By acknowledging the potential for innovation and disruption across various industries through non-financial blockchain use cases, the bank demonstrates an understanding of the unique characteristics and capabilities of distributed ledger technology. This approach fosters an environment conducive to the exploration and development of novel solutions, particularly as other regions like Hong Kong are following a similar approach.