Bank of Italy flags liquidity risks in global stablecoins
TL;DR Breakdown
- Bank of Italy’s deputy governor urged the EU to clarify cross-border stablecoin rules.
- The call comes as the stablecoin market tops $300B, led by Tether ($171B).
- The US GENIUS Act has intensified regulatory pressure globally.
A senior Bank of Italy official has called on the European Union to clarify how cross-border stablecoins are treated under its new crypto regime. She warned that gaps in the rulebook could leave investors and the financial system exposed.
This comes in when the digital assets market witnessed a stablecoin boom. CoinMarketCap data shows that the cumulative stablecoin market cap breached $300 billion mark. Tether’s USDT is leading the tally with $171 billion cap, while Circle’s USDC claims the second spot in the tally with $74.3 billion cap.
Bank of Italy flags Legal Risks
According to a report, Deputy Governor Chiara Scotti in an international payments conference noted that “multi-issuance” model risks creating mismatches between reserves and redemptions. This is the space where the same token is issued inside and outside the bloc. “Clarity at the legislative or standard-setting level would be both timely and valuable,” she said.
Scotti urged lawmakers to provide legislative clarity. She added that the issuance should be limited to jurisdictions with equivalent regulatory standards and redemption guarantees.
The issue has already sparked a clash between Brussels and Frankfurt. The European Commission has indicated that tokens from different legal entities of the same issuer may be treated as interchangeable. However, the European Central Bank looked more cautious. It has pointed out potential strains if EU-issued stablecoins are backed by reserves sitting offshore.
Scotti has spent nearly two decades at the US Federal Reserve before joining the Bank of Italy. She highlighted that the model could improve liquidity and scalability but it also raises legal and operational headaches. She added that non-EU issuers should face similar consumer-protection rules and cross-border crisis protocols.
Global Stablecoin Race Heats Up
Her comments land when Washington is leading the regulatory initiative. Back in July, US lawmakers passed the GENIUS Act. It is the country’s first federal stablecoin law. This puts so-called “payment stablecoins” under a regime that looks a lot like the EU’s framework.
Amid fresh rules brewing out, Trump-linked World Liberty Financial launched its own stablecoin USD1. Its market cap has gone on to hit $2.65 billion, placing it among the biggest of the stablecoins.
The GENIUS Act seems to be rattling policymakers in Europe. Some worry that MiCA may not be enough to stop global regulatory arbitrage, or it could protect the bloc’s control over payments.
Meanwhile, the market keeps expanding. Other than USDT, Tether has rolled out USA₮, a dollar-backed token aimed at the domestic US market. This move had led the market to guess that “will the stablecoin giant launch another token for different regions. In order to push operations, it hired former congressman Bo Hines and partnered with Anchorage Digital and Cantor Fitzgerald.
