The report warned that systemic use of dollar-based stablecoins like Tether and USDC could spark market turmoil if mass redemptions strain US bond reserves.
The central bank in Italy has warned that the surge in crypto-asset prices following Donald Trump’s return to the White House could pose broader risks to global markets.
In a semiannual financial stability report published on Tuesday, the Bank of Italy pointed to a temporary but sharp rise in crypto valuations after the US administration signaled support for digital assets.
The bank said speculative crypto-assets, particularly those like Bitcoin, experienced strong inflows after Trump’s inauguration and subsequent policy announcements.
Officials in Rome cautioned that if these highly volatile instruments become more closely tied to traditional financial systems, they could amplify vulnerabilities for both markets and financial intermediaries.
Italy’s central bank noted that the value of crypto-assets reached $2.75t by the end of March, with Bitcoin accounting for over 60% of that total.
Italy Sees Financial Fragility in Growing Role of Bitcoin and Stablecoins
According to the report, a significant share of Bitcoin is now held by ETF issuers, trading platforms and non-financial corporations. These entities are either betting on Bitcoin as a stock-price enhancer or using it to reshape business models, despite its high volatility.
Many operate outside traditional regulatory frameworks, especially in the US, China, Canada and the UK. Their limited presence in the eurozone has so far insulated European markets, but Italian regulators warned that contagion risks are growing.
The report also raised concerns about the dominance of dollar-based stablecoins such as Tether and USD Coin. If such instruments become systemic, their issuers’ heavy reliance on US government bonds as reserves could trigger market instability during redemption crises.
EU Authorities Monitor Offshore Crypto Exposure as Stablecoin Risks Mount
The central bank warned of a potential liquidity crunch in the event of a large-scale stablecoin failure, with spillover effects that could reach both US bond markets and global financial systems.
European officials have echoed those concerns. ECB President Christine Lagarde said in April that MiCAR, the EU’s landmark crypto regulation, may not be strong enough to shield European financial institutions from fallout linked to a US-driven stablecoin boom. She warned that a mass shift of savings into dollar-pegged assets could weaken the euro area’s monetary sovereignty.
Meanwhile, Natasha Cazenave of the European Securities and Markets Authority added that, though crypto remains a small slice of global finance, its growing entanglement with the real economy could soon amplify risks. Italian authorities said they are closely monitoring the business models and liquidity practices of firms offering cryptoassets in both the EU and offshore markets.
As European lawmakers move to strengthen rules under MiCAR, Italy’s warning points to the growing need for global coordination. Without it, national regulations may struggle to keep pace with the rapid global spread of crypto, especially as political support fuels faster adoption in major economies.
Without it, the rapid internationalization of crypto-finance, especially as political backing accelerates adoption in key economies, could overwhelm national frameworks.
