The Bank of Italy Advocates for a Comprehensive Legal Framework to Regulate Stablecoins
In Brief
In June, the Bank of Italy published a report urging lawmakers to establish a 'solid, risk-oriented regulatory framework' for stablecoins to avoid scenarios similar to bank runs.
The Bank of Italy has recently emphasized Asserting the importance of a solid legal structure for managing stablecoins, the report emphasizes the need for consumer safeguards and the prevention of potential liquidity crises.
This call from the Bank of Italy was publicly communicated in June within its report concerning Markets, Infrastructure, and Payment Systems. The report highlighted the urgent need for policymakers to develop a rigorous, risk-focused regulatory approach for stablecoins, which are a type of cryptocurrency tied to a reserve of assets.
Stablecoins These digital currencies, designed to mitigate the price fluctuations typically seen in cryptocurrencies like Bitcoin and Ethereum, are swiftly gaining popularity in the digital economy. They are becoming a vital component of the rapidly evolving decentralized finance (DeFi) landscape, bridging the gap between traditional and decentralized financial systems.
Considering this interrelationship, the Bank of Italy stresses the necessity for a cohesive regulatory approach for stablecoins and DeFi. The report warns that a sudden surge in stablecoin usage could spark a new wave of innovation within DeFi, further intertwining conventional financial frameworks with decentralized ones.
Simultaneously, the Bank of Italy The report points out that industry stakeholders must not forget that many decentralized projects are driven by key individuals or groups. Thus, these efforts need to embrace traditional and responsible business models to function within a regulated financial environment. It recognizes the broader potential of blockchain technology, which could extend to decentralized identity verification, real estate, supply chain logistics, voting systems, and carbon credit validation, beyond just financial uses.
On the other hand, the Bank clarifies that not every cryptocurrency transaction or asset necessitates regulation under financial services. It encourages nations to collaborate in creating a global regulatory framework.
Italy and Stablecoins
Despite the increasing number of cryptocurrencies worldwide, surveys from the Bank of Italy indicate that only around 2% of Italian households have invested in these digital assets. The exposure of Italian financial institutions to cryptocurrencies remains quite modest. As EU regulations regarding digital assets evolve, Italian authorities have already started laying the groundwork for a regulatory landscape.
This approach from the Bank of Italy underscores a larger global conversation regarding the governance of emerging digital assets. Given that stablecoins play an increasingly significant role within the DeFi sphere, their regulation has become a focal point among international financial authorities, reflecting a notable transition in the finance sector. New regulatory models are evolving to better navigate the shifting landscape of digital assets.
Read more:
- RBA Reviews Regulatory Frameworks for Stablecoins and Central Bank Digital Currencies (CBDCs)
- Japan Has Lifted Its Ban on Stablecoins, and Banks are Getting Ready to Adopt Them
- Animoca Brands is striving to establish protections for NFT creators through a new legal framework.
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