Italy Touts Stricter Oversight on Multi-Issuer Stablecoins

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A senior Bank of Italy official warned that stablecoins issued by multiple entities across different countries pose significant risks to the European Union’s financial system unless they are strictly limited to jurisdictions with equivalent regulatory standards. Speaking at the Economics of Payments Conference in Rome on Thursday, Chiara Scotti, vice director of the Bank of Italy, said multi-issuance stablecoins — digital tokens issued in several countries under a single brand — may increase liquidity but also bring “considerable legal, operational, liquidity and financial stability risks” if at least one issuer is outside the EU. “Although this architecture could enhance global liquidity and scalability, it poses significant legal, operational, liquidity and financial stability risks at EU level, particularly if at least one issuer is located outside the European Union,“ Scotti said. Scotti recommended that multi-issuance stablecoins be limited to jurisdictions with equivalent regulatory standards, that redemption should be ensured at par and cross-jurisdictional crisis protocols should be enforced. In the EU, stablecoins currently fall under the Markets in Crypto-Assets Regulation (MiCA) framework, with issuers needing to be EU-authorized and tokens being classified as asset-referenced or e-money tokens. This leads to strict reserve, disclosure and governance rules; algorithmic stablecoins are effectively banned. Scotti’s commentary indicates that she fears that a multi-issuance stablecoin may undermine the effectiveness of some of those rules. Stablecoins recognized as promising tools Scotti highlighted that the robustness of the multi-issuance stablecoin model “hinges on strong cross-border cooperation among supervisory authorities, including mechanisms to consistently monitor and verify the adequacy of reserves.” She recognized that stablecoins are “promising tools for lowering transaction costs, enhancing efficiency and enabling 24/7 availability.” She argued, however, that only stablecoins pegged to a single fiat currency are suitable as payment instruments. “It is worth noting that while various types of crypto products are used…