Bank of Italy Will Issue Stablecoin Guidelines \'in the Next Few Days\' to Align With EU Rules

The Bank of Italy's guideline on stablecoins will be necessary to align the Italian central bank with the wider European stance.

Key Takeaways

The Bank of Italy will publish new guidelines “in the next few days” on how to apply European Union rules regarding cryptocurrencies, governor Fabio Panetta said during a banking association meeting.

Panetta is traditionally known as an anti-crypto banker and has always been critical of digital assets, even when he served on the board of the European Central Bank. While the new regulation brings changes, it may not be as disruptive to the crypto industry as feared.

Bank Of Italy Guideline On Stablecoins

During the assembly of the Italian Banking Association (ABI), the governor of the Bank of Italy, Fabio Panetta, announced that the Italian central bank is preparing new guidelines to align with MiCA, which will primarily concern stablecoins. These fall under the new categorization of electronic money (EMT), linked to the value of a specific official currency, and therefore suitable for use in payments.

“In the next few days we will publish a communication to the market on this matter, in order to encourage an application of MiCAR that contributes to preserving the smooth functioning of the markets and the payment system and to safeguard the holders of these instruments,” Panetta said.

However, Panetta specified that in BoI assessments, the only instruments capable of fully carrying out payment functions while preserving public trust are EMTs, Electronic Money Tokens. And only banks and electronic money institutions can issue them.

“Only these instruments are in fact anchored to the value of a legal tender currency and protected by specific rules that safeguard the value of the funds paid, in order to offer holders the guarantee of reimbursement at nominal value at any time,” he said.

Panetta's View On Crypto

Fabio Panetta, the current governor of the Bank of Italy, is a prominent voice against cryptocurrencies. During his time as a board member at the European Central Bank, he consistently criticized digital assets. And this stance has only strengthened since taking his current role in 2023.

Panetta is particularly concerned about the risks that Bitcoin and other cryptocurrencies bring to retail investors. He argued that these assets lack inherent value and don’t generate income like traditional investments. Additionally, he criticized the lack of regulation surrounding cryptocurrency exchanges, potentially facilitating tax evasion and money laundering.

“Central banks do not control the circulation of crypto-assets, which means that, under current rules, they cannot be considered a real currency,” he said.

“The regulatory framework of the matter is, among other things, still uncertain. And all the risks of falling into a scam remain borne by those who purchase virtual currencies. They are therefore not suitable for those looking for a somewhat secure way of saving.”

In his own words, Panetta describes them as “unsecured crypto-assets” created through complex algorithms, lacking any guarantee of value. He compared them to “high-risk speculative contracts” unsuitable for mainstream financial systems.

“Unsecured crypto-assets, such as Bitcoin and Ethereum, are generally not issued by any operator, have no intrinsic value and do not generate income streams such as coupons or dividends,” said Panetta.

“They are created using IT procedures and there is no person or real or financial activity that ensures their value. They are sometimes traded on informal and opaque circuits or on platforms not subject to adequate controls.”

Aligning With Europe's Stance

The Bank of Italy’s guideline on stablecoins will be necessary to align the Italian central bank with the wider European stance. But it’s equally as important to dispel a common myth: Europe’s regulation MiCA doesn’t introduce entirely new rules for stablecoins backed by traditional currencies. Instead, it strengthens existing regulations established in the Electronic Money Directive (EMD) in 2000.

EMD defines e-money as a digital equivalent to cash, similar to pre-paid cards. Since fiat-backed stablecoins essentially represent a claim on the issuer’s reserves, they fall under this definition.

According to EMD, only authorized institutions like Electronic Money Institutions (EMIs) and credit institutions can legally issue fiat-backed stablecoins within the European Economic Area (EEA).

This implies that many currently available stablecoins might have been operating in Europe without proper authorization. MiCA clarifies existing legal requirements and sets additional standards for compliant issuers, effective July 2024.

Do Binance and Tether Comply with MiCA?

Major cryptocurrency exchanges like Binance are adapting to MiCA. This involves restricting trading of certain stablecoins, but not necessarily removing them from the platform entirely.

Currently, only a few stablecoin issuers hold the necessary licenses. Iceland’s Monerium (EURe) and the US exchange Gemini (GUSD) are among these. The expectation is that other established players like Tether (USDT) will eventually secure the necessary licenses to comply with MiCA, however this could equally lead to restrictions for major players like Tether if they do not comply.

Giuseppe Ciccomascolo

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