Bank of Italy Calls for Closer Regulatory Monitoring of Stablecoins

The Bank of Italy has urged for increased regulatory monitoring of stablecoins due to their lack of stability and potential harm to consumers.

In a recent report, the central bank called for applying financial standards to stablecoin issuers to ensure consumer protection.

The bank emphasized the need for a robust regulatory framework to prevent worst-case scenarios, such as a “run” on stablecoins. It also highlighted the close connection between stablecoins and decentralized finance (DeFi) and stressed the importance of regulating stablecoins to reduce the fragility of the DeFi ecosystem.

#Bankitalia 📌 #26June Alessandra #Perrazzelli discussed about the evolving regulatory landscape for #DigitalAssets at @pointzeroforum Panel “State of Global Digital Asset Regulation: Navigating Opportunities in an Evolving Landscape”#PZF2023 #PointZeroForum @sif_sfi @elevandi pic.twitter.com/Jm0OBeifZh

— Banca d’Italia (@bancaditalia) June 26, 2023

The Bank of Italy pointed out that stablecoins have not proven to be stable, citing the collapse of TerraUSD (UST) as an example.

It emphasized the importance of addressing the “decentralization illusion” within the crypto industry, suggesting that projects should operate within accountable business structures to participate in the regulated financial sector.

While calling for closer scrutiny, the bank acknowledged that not all crypto activities or assets need to be subject to financial sector regulation, particularly those that do not serve customers’ financial needs.

The bank recognized the potential of blockchain technology for non-financial use cases and called for international cooperation to establish a consistent regulatory framework. It emphasized the need for flexibility and scalability in cooperation arrangements to adapt to the evolving crypto ecosystem.

Supported By Cryptomom

This stance aligns with ‘Cryptomom’ Commissioner Hester Peirce of the U.S. SEC, who advocates for regulatory clarity while allowing room for innovation.

The Bank of Italy’s call for closer regulatory scrutiny aims to address stability, consumer protection, and the need for an effective regulatory framework. It seeks to strike a balance between supporting innovation and mitigating risks in the crypto space.

Collaboration and international cooperation among regulators will be crucial in ensuring the safety and integrity of the financial system amidst evolving technologies.

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