- During mass redemptions, Italy’s central bank warns that dollar-pegged stablecoins could destabilize global bond markets.
- Trump’s return and crypto-friendly stance fuel a $2.75T market surge, sparking concerns among European regulators.
- EU oversight may fall short as U.S. crypto policy shifts rapidly under Trump, heightening global financial risk fears.
Italy’s Central Bank has issued a direct warning about the growing risk of financial instability following a sharp rally in global cryptocurrency markets. Bitcoin led a market-wide influx as the total market capitalization of digital assets increased to $2.75 trillion by the end of March.
U.S. President Donald Trump’s return to office and his higher level of public support of cryptocurrency initiatives are behind much of the rally, officials say. This rapid growth of the dollar-pegged stablecoins exceeds the capacity of existing regulations and can lead to large volatility in global markets, warned Italy’s banking authority.
Italy Warns Stablecoins Pose Growing Threat to Global Financial Systems
Italy’s central bank singled out stablecoins such as Tether (USDT) and USD Coin (USDC), which are backed by U.S. Treasuries, as a particular concern. Given their link to sovereign debt instruments, policymakers fear that mass redemptions of these digital tokens during market stress could trigger widespread disruptions in global bond markets.
Though the European Union has recently adopted the Markets in Crypto-Assets Regulation (MiCA) framework to tighten oversight, Italian authorities argue it may not go far enough to address the cross-border nature and rapid expansion of crypto-related instruments. According to the bank, the scale of adoption, combined with a lack of coordinated international response, could lead to vulnerabilities beyond the reach of national regulation.
Bank of Italy comments are made amid a tense European financial environment. President of the European Central Bank, Christine Lagarde, said that it was a ‘difficult’ phenomenon to control the usage of U.S. Stablecoins based on the international dollar is ‘damaging to the role of the euro’.
The Trump Administration Pushes the Crypto Agenda With Key Hires and New Product Launches.
President Trump has taken visible steps in the United States to align federal policy with the digital asset industry. He has reportedly appointed individuals with pro-crypto positions to senior regulatory roles and has ordered the disbanding of a Justice Department unit that previously focused on investigating crypto-related financial crimes.
Market enthusiasm is further fueled, however, by the announcement by Trump Media & Technology Group that they will be creating a utility token and digital wallet. The objective of the project is to add additional capabilities to its Truth streaming service. The perception has been reinforced that Trump’s administration is proactively backing digital asset use in both financial and media sectors.
A new stablecoin venture has also attracted the support of the President’s sons. The proposed new legislative proposal, the GENIUS Act, some believe, may help us go back to business as usual and abandon our oversight of the U.S. crypto space, as well as get rid of investor protection frameworks associated with the regulation of the U.S. crypto space.
European regulators are worried that the pace of policy shifts and fresh crypto-related projects spawned out of the Trump administration is far too fast. Such developments in the United States, with its large economy, could substantially affect international adoption patterns and radically change the international financial environment in uncertain ways, warn Italian officials.
Authorities in Italy and across the EU have asked for closer cooperation with other regulatory bodies around the world. The Bank of Italy warned that systemic risks are becoming more likely the more that crypto products consume mainstream finance, commerce, and public infrastructure.
