Italy’s high banking authority has referred to as for a “robust, risk-based” regulatory framework for stablecoins, which might assist prevent a worst case state of affairs — a “run” on stablecoins.
The central bank’s just lately launched “Markets, Infrastructures and Payment Systems” report for June has referred to as on regulators to apply the identical monetary conduct requirements to stablecoin issuers within the business.
#Bankitalia #26June Alessandra #Perrazzelli mentioned in regards to the evolving regulatory panorama 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 stated the rise of cryptocurrencies, coupled with a number of “boom and bust cycles” in a largely unregulated setting, has brought about “significant consumer harm.”
Regulatory consideration on stablecoin issuers particularly ought to be a precedence due to its shut connection to DeFi, the bank stated:
“A robust, risk-based regulation of stablecoins ensuring the prevention of ‘runs’ on their issuers is a necessary condition to reduce the fragility of the DeFi ecosystem, given the prominent role of this asset class in decentralized finance.”
“It is crucial that policy interventions on stablecoins and DeFi are well synchronized since the diffusion of stablecoins […] is likely to spur new waves of DeFi innovation and increase the interconnection between traditional and decentralized finance,” it added.
The Italian banking authority additionally famous that stablecoins “have not proved stable at all” — citing probably the most notable collapse of Terra’s algorithmic stablecoin TerraClassicUSD (USTC) in May 2022.
The adoption of #DLT options, particularly if featured by weak organizational constructions, might undermine the monetary system due to lack of controls, lack of particular guidelines as mitigation instruments, interdependence amongst regulated and non-regulated entities. The fragmentation is…
— Banca d’Italia (@bancaditalia) June 27, 2023
The bank stated the business additionally wants to debunk “the decentralization illusion” by acknowledging that the majority decentralized protocols are operated by core stakeholders who can typically “extract ownership benefits.”
“Such projects should be brought back to traditional, accountable business structures as a pre-condition for operating in the regulated financial sector,” the bank added.
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The bank nonetheless pressured that it isn’t crucial to topic each crypto asset or exercise to monetary providers regulation:
“Not all crypto activities and not all forms of crypto-assets need to be covered or should be covered by financial sector regulation, in particular where their issuance, trading and holding do not serve customers’ financial needs through a payment or investment function.”
Among the non-financial use instances enabled by blockchain are decentralized identification, actual property, provide chain, voting and carbon credit.
Italy’s central bank has additionally referred to as for nations to cooperate and set up a global regulatory framework as a result of the know-how operates no matter nation state borders.
Magazine: Unstablecoins: Depegging, bank runs and different dangers loom
