Stablecoins could pose a threat to financial stability if concerns about the digital assets’ value sparked a rush to redeem them, the Bank of Italy said in its twice-yearly Financial Stability Report.
The Italian central bank identified fragmented regulation as a major challenge in tackling stability risks linked to stablecoins, and said European Union crypto asset regulations (MiCAR) protected stablecoin holders more than U.S. rules (Genius Act).
* Stablecoins are digital assets designed to maintain a stable value relative to a reference asset in the traditional financial system, typically the U.S. dollar. Issuers hold reserves in an effort to guarantee the value of the stablecoins.
* Stablecoins have become a focus of attention for financial authorities because they represent the nexus between the crypto universe and the traditional financial system. Crypto traders, for example, can use stablecoins to settle transactions.
* MiCAR applies to issuers of stablecoins and also to crypto-asset service providers (CASPs), such as custody and trading platforms. The Genius Act focuses solely on issuers, leaving regulation of the capital and liquidity requirements of those issuers to federal or state supervisors, the Bank of Italy noted.
* To stop stablecoins from becoming an alternative to bank deposits instead of a mere payment tool, MiCAR bans both issuers and crypto-asset service providers from paying interest. The U.S. Genius Act applies the ban only to issuers, the central bank’s report said.
* MiCAR prohibits fees on stablecoin redemptions, while the Genius Act allows them — making EU protections stronger for holders, the Bank of Italy said.
* “Asymmetric rules” are a problem in particular when identical stablecoins are issued by firms that operate through subsidiaries active in different countries, the report said.
* In the case of “fully fungible” stablecoins the greater protection which MiCAR rules provide could give an incentive to non-EU residents to redeem their tokens in the EU, the Bank of Italy said. In this case the reserves that issuers are obliged to hold within the EU may not be sufficient, it warned.