#Trump100Days Bank of Italy warns of systemic cryptocurrency risks and power concentration during Trump's era
#AltcoinETFsPostponed $BTC $XRP $BNB
Bank of Italy warns of systemic cryptocurrency risks and power concentration during Trump's era
The Bank of Italy warned of the growing threat posed by cryptocurrencies and the close relationship between the Trump administration and the sector.
The Italian central bank warned that the connection between cryptocurrencies and traditional finance could lead to market instability.
It pointed out that Trump's promotion of digital assets may pose threats to markets and intermediaries.
Despite this, Italy's largest commercial bank made investments in Bitcoin in January.
The Italian central bank reiterated long-standing concerns about the increasing influence of cryptocurrencies in traditional finance, even as the largest commercial bank in the country accelerated its push toward digital assets.
In its latest report on financial stability, published on Monday, the Bank of Italy, or Banca d'Italia, pointed to the increasing global integration of cryptocurrencies as a potential threat to financial stability.
For years, central banks around the world have issued nearly identical warnings about the systemic risks posed by the increasing links between cryptocurrencies and traditional finance, pointing to volatility, regulatory gaps, and potential contagion across markets.
However, recent political developments have only served to heighten concerns among major financial institutions, indicating a shift in winds in Washington, D.C.
In its report, the bank pointed to sharp increases in the prices of digital assets following Donald Trump's election in the U.S. and his administration's cryptocurrency-friendly initiatives, warning that deeper entanglement between traditional finance and the volatile asset class could create systemic vulnerabilities.
She added, "If these instruments become more intertwined with the traditional financial system, there may be greater vulnerabilities for markets and intermediaries."
By the end of March, the value of the global cryptocurrency market reached $2.75 trillion. Bitcoin alone accounted for more than 60% of this figure, while 30% came from other unsupported crypto assets.
Only 9% of the market consists of stablecoins - digital assets linked to traditional currencies, most of which are tied to the US dollar.
The American shift towards cryptocurrencies during Trump's presidency has sparked renewed interest in digital assets in particular.
Over the past months, regulatory bodies in the United States have taken a softer stance towards cryptocurrencies and dropped multiple investigations into cryptocurrency companies, while the government hosted cryptocurrency events at the White House.
The increasing links between government, traditional finance, and cryptocurrencies, especially in the United States, raise concerns for the Bank of Italy. The report also targeted ETFs and treasury bonds for companies that increasingly hold Bitcoin to support stock prices.
It also warned of conflicts of interest, governance gaps, and the concentration of cryptocurrency power in the hands of a few companies based in the United States.
She stated that "a significant portion of Bitcoin is held by companies that operate exclusively in the digital asset sector (for example, trading platforms), which are not subject to specific governance requirements and may have significant conflicts of interest."
It was claimed that about 75% of these companies are based in the United States, with other companies in China, Canada, and the United Kingdom, and minimal presence in the Eurozone.
The bank also noted the disproportionate impact of dollar-backed stablecoins, such as Tether's USDT and Circle's USDC. It pointed out that widespread demand for redemptions could lead to fire sales of U.S. government bonds, disrupting global markets.
The bank warned that European stablecoins issued by American companies could undermine payment systems in the European Union and threaten monetary sovereignty.
But while the central bank calls for caution, not all banks in the country agree with this direction. Intesa Sanpaolo, Italy's largest banking group, is quietly working on developing its own strategy in the field of cryptocurrencies.
In January, the bank purchased 11 Bitcoins worth approximately one million euros (one million USD), marking the first direct purchase of Bitcoins by an Italian lender. The bank declined to clarify its reasoning.
It also guaranteed Italy's first blockchain bond in July 2024 and added instant cryptocurrency trading to its trading desk in November.
Even lawmakers have started to intervene. In January, Deputy Marcelo Cobo urged Italian banking institutions to invest in Bitcoin.
Despite official concerns, the Bank of Italy does not abandon blockchain technology, even if it is cautious about its financial value.
Last year, it announced a licensed consensus protocol designed to work with Bitcoin, adding privacy features for investigators and pushing for a digital central bank ledger.
