A senior Bank of Italy official warned that stablecoins issued by multiple entities across different countries pose significant risks to the European Union’s financial system unless they are strictly limited to jurisdictions with equivalent regulatory standards.
Speaking at the Economics of Payments Conference in Rome on Thursday, Chiara Scotti, vice director of the Bank of Italy, said multi-issuance stablecoins — digital tokens issued in several countries under a single brand — may increase liquidity but also bring “considerable legal, operational, liquidity and financial stability risks” if at least one issuer is outside the EU.
“Although this architecture could enhance global liquidity and scalability, it poses significant legal, operational, liquidity and financial stability risks at EU level, particularly if at least one issuer is located outside the European Union,“ Scotti said.
Scotti recommended that multi-issuance stablecoins be limited to jurisdictions with equivalent regulatory standards, that redemption should be ensured at par and cross-jurisdictional crisis protocols should be enforced.
In the EU, stablecoins currently fall under the Markets in Crypto-Assets Regulation (MiCA) framework, with issuers needing to be EU-authorized and tokens being classified as asset-referenced or e-money tokens. This leads to strict reserve, disclosure and governance rules; algorithmic stablecoins are effectively banned. Scotti’s commentary indicates that she fears that a multi-issuance stablecoin may undermine the effectiveness of some of those rules.
Stablecoins recognized as promising tools
Scotti highlighted that the robustness of the multi-issuance stablecoin model “hinges on strong cross-border cooperation among supervisory authorities, including mechanisms to consistently monitor and verify the adequacy of reserves.”
She recognized that stablecoins are “promising tools for lowering transaction costs, enhancing efficiency and enabling 24/7 availability.” She argued, however, that only stablecoins pegged to a single fiat currency are suitable as payment instruments.
“It is worth noting that while various types of crypto products are used as a means of payment, only stablecoins pegged to a single fiat currency are suitable for this function, also because they offer a high level of customer protection through the right to redemption at their nominal value.“
Related: Italian gov’t to ramp up surveillance of crypto market
Italy takes firm stance on stablecoins
Italian regulators have voiced concerns over the rise of stablecoins. Italy’s financial markets regulator, Commissione Nazionale per le Società e la Borsa, joined regulators in France and Austria to call for regulatory supervision of crypto firms to be transferred to the Paris-based European Securities and Markets Authority.
At the end of May, Fabio Panetta, a former European Central Bank official and Governor of the Bank of Italy, suggested that a euro-based central bank digital currency is the right tool for addressing the risks associated with increasing cryptocurrency adoption, rather than regulating cryptocurrencies. This followed a late April report by the Bank of Italy singling out stablecoins and non-financial firms’ crypto exposure as key concerns.
Related: Bank of Italy to release crypto guidelines in ‘coming days’ — Governor
The report highlighted potential risks if dollar-pegged tokens were to become systemic and that disruptions in stablecoins or the underlying US government bonds could have “repercussions for other parts of the global financial system.” Also in April, Italy’s minister of economy and finance, Giancarlo Giorgetti, warned that US stablecoin policies may threaten the euro’s dominance.
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