Italy’s central bank calls for framework to prevent stablecoin runs

The bank said the rise of cryptocurrencies, coupled with several “boom and bust cycles” in a largely unregulated environment has caused “significant consumer harm.”

Regulatory attention on stablecoin issuers in particular should be a priority because of its close connection to DeFi, the bank said: “A robust, risk-based regulation of stablecoins ensuring the prevention of ‘runs’ on their issuers is a necessary condition to reduce the fragility of the DeFi ecosystem, given the prominent role of this asset class in decentralized finance.”

“It is crucial that policy interventions on stablecoins and DeFi are well synchronized since the diffusion of stablecoins [...] is likely to spur new waves of DeFi innovation and increase the interconnection between traditional and decentralized finance,” it added. The Italian banking authority also noted that stablecoins “have not proved stable at all” — citing the most notablesolutions, especially if featured by weak organizational structures, could undermine the financial system due to lack of controls, lack of specific rules as mitigation tools, interdependence among regulated and non-regulated entities. The fragmentation is…

Source: News Formal (newsformal.com)

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