Italy To Issue Guidelines For EU Rules Implementation

The Bank of Italy is preparing to publish guidelines to implement new European Union cryptocurrency regulations, according to Governor Fabio Panetta. Announced The guidelines aim to ensure the effective application of the EU’s Markets in Crypto Assets Regulation (MiCA) while protecting cryptocurrency holders.

Panetta outlined the risks and characteristics of the cryptocurrency market in a speech to the Italian Banking Association, highlighting the need for regulation, especially for stablecoins, which are digital assets pegged to a portfolio of reserve assets such as currencies, deposits and securities.

Without strict regulation, these stablecoins could face a redemption rush if they lose the trust of their holders. Unbacked cryptoassets like Bitcoin and Ethereum pose significant risks due to the lack of intrinsic value or revenue generation, their high volatility, and the opaque, informal circuits through which transactions often take place.

Risks and Categories in the Cryptocurrency Market

Panetta highlighted the potential dangers, noting that these unbacked assets are often held by individuals seeking speculative profits and sometimes to circumvent tax and anti-money laundering regulations. Their value is often detached from fundamentals and can fluctuate rapidly, making them unsuitable as a reliable means of payment, store of value or unit of account.

While currently a small portion of the market, the proportion of unbacked crypto assets held by unsuspecting investors is likely to grow, especially in emerging markets. The EU’s MiCA framework, due to be fully implemented later this year, aims to mitigate these risks by establishing specific rules for different types of digital tokens.

MiCA distinguishes between single-currency linked electronic money tokens (EMTs), multi-asset linked asset reference tokens (ARTs), and unbacked digital assets. EMTs and ARTs are considered stablecoins with strict regulatory requirements, while unbacked assets and utility tokens are primarily subject to pre-notification obligations.

Panetta said that while there is still much work to be done as the crypto industry is complex and rapidly changing, these new regulations will finally bring the crypto market under control. The risks of managing stablecoins on unreliable platforms, especially outside of Europe, will further highlight the need for traditional and non-traditional financial intermediaries to have strong financial and operational risk management.

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