Italy Sounds Alarm on Cryptos Growing Connection to Traditional Finance
In its latest financial stability report, the Bank of Italy expressed concern about the mounting influence of digital assetsparticularly those with high volatility like Bitcoinand their growing entanglement with conventional financial systems.
The report suggests that as crypto becomes more integrated with mainstream finance, the chances of broader market instability increase. The concern is especially pronounced following recent policy signals from Washington. Since President Trumps return to office, the U.S. has moved quickly to craft a regulatory framework for the sector, including efforts to establish rules for stablecoins tied to the dollar.
Romes warning comes amid a sharp rise in crypto asset prices, a trend attributed in part to Americas friendlier stance toward the industry. While stablecoins have generally held their value, the broader crypto space remains unpredictable and prone to rapid swings.
Officials from the European Central Bank share the anxiety. Top figures from France and Finland have both cautioned against the normalization of crypto assets, with Finlands Olli Rehn stating plainly that he views the U.S. direction as a cause for concern.
Italys central bank also highlighted a more specific risk tied to stablecoins: many of them rely on short-term U.S. government bonds to maintain their peg. A failure by a major issuer could spark a liquidation of those assets, potentially shaking the Treasury market and creating ripple effects across the global financial system.
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