Italian Bank Issues Alert on Systemic Cryptocurrency Threats, Amassing Influence Under Trump's Administration

In a nutshell

Italy's central bank has reiterated their concerns about crypto's integration with traditional finance, stating it could destabilize markets.
Trump's crypto-friendly policies have led to a surge in crypto prices and worried financial institutions.
Notably, Italy's biggest commercial bank, Intesa Sanpaolo, purchased Bitcoin in January, despite the bank's cautionary stance.

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Italy's central bank, the Bank of Italy, has once again raised the alarm on crypto's growing influence in the traditional financial world, particularly as the US grows friendlier towards digital assets. In its latest Financial Stability Report, published on April 1, the bank warned that expanding connections between crypto and traditional finance could result in systemic vulnerabilities, potentially causing market disruptions and straining intermediaries.

Over the years, central banks worldwide have expressed similar concerns about crypto's volatility, regulatory gaps, and potential impact on financial stability. Recent political developments, like the pro-crypto shift under President Trump, have only added fuel to the fire.

The Bank of Italy singled out sudden increases in digital asset prices following Trump's U.S. election as evidence of the potential for heightened market volatility. If cryptocurrencies become more entwined with traditional finance, they could create systemic risks, the bank warned.

In mid-March, the crypto market had reached a staggering $2.75 trillion valuation. Bitcoin alone accounted for over 60% of that figure, with unbacked crypto assets making up an additional 30%. Only 9% of the market consisted of stablecoins, digital assets tied to traditional currencies, most of which are pegged to the U.S. dollar.

Crypto in Italy

The US's growing pro-crypto stance has not gone unnoticed in Italy. Intesa Sanpaolo, the country's largest banking group, made headlines when it purchased 11 bitcoins worth approximately €1 million ($1 million) in January. This marked the first direct purchase of bitcoins by an Italian lender and left many wondering about the bank's strategy.

Meanwhile, Italian lawmaker Marcello Coppo called on banking foundations to invest in Bitcoin in January. Despite the central bank's cautious tone, it seems that crypto is starting to gain traction in Italy.

Regulatory Challenges

One of the main concerns the Bank of Italy flagged is the concentration of power in U.S.-based firms that dominate the crypto space. These companies are not subject to specific governance requirements and may have significant conflicts of interest. About 75% of these firms are based in the U.S., with the remainder operating in China, Canada, and the UK, leaving the euro area largely out of the picture.

The bank also highlighted the disproportionate influence of USD-backed stablecoins like Tether's USDT and Circle's USDC. A widespread run on redemptions could trigger a fire sale of U.S. government bonds, potentially shaking global markets. The Bank further warned that euro stablecoins issued by U.S. firms could erode EU payment systems and threaten monetary sovereignty.

In light of these concerns, the Bank of Italy advocates for stronger global regulatory coordination to mitigate risks.

Edited by Sebastian Sinclair

Italy's central bank, the Bank of Italy, has expressed concerns about the integration of cryptocurrencies with traditional finance, citing potential risks to market stability.
Notably, Italy's largest banking group, Intesa Sanpaolo, purchased 11 bitcoins worth approximately €1 million ($1 million) in January, marking the first direct purchase of bitcoins by an Italian lender.
The US's growing pro-crypto stance has not been lost on Italy, with lawmaker Marcello Coppo calling for banking foundations to invest in Bitcoin in January.
In its Financial Stability Report, the Bank of Italy cited concerns about the dominance of U.S.-based firms in the crypto space and the disproportionate influence of USD-backed stablecoins like Tether's USDT and Circle's USDC.
The cryptocurrency market had a staggering $2.75 trillion valuation in mid-March, with bitcoin accounting for over 60% and unbacked crypto assets making up an additional 30%.
Only 9% of the market consisted of stablecoins, digital assets tied to traditional currencies, most of which are pegged to the U.S. dollar.
The Bank of Italy advocates for stronger global regulatory coordination to mitigate risks associated with cryptocurrencies and crypto trading.
Trump's crypto-friendly policies and subsequent surge in digital currency prices have caused worry among financial institutions.
Central banks around the world have consistently expressed concerns about crypto's volatility, regulatory gaps, and potential impact on financial stability.
Crypto events and blockchain technology integration into the business world have been accompanied by warnings about potential instability and obvious crypto risks.
Digital currencies and digital assets, such as Ethereum (ETH) and Bitcoin, have found their way into the discussion of finance and finance-related events in Italia (Italy).

Italian Bank Issues Alert on Systemic Cryptocurrency Threats, Amassing Influence Under Trump's Administration