The financial sector is increasingly making extensive and significant use of the potential of digitalization, where the application of decentralized technologies (distributed ledger technologies - DLTs) and crypto-asset businesses and services are of particular importance.
The Bank of Italy is interested in these areas, as they concern the framework of its many functions: the prudential oversight of supervised entities, monitoring the smooth functioning of the payments system; safeguarding monetary and financial stability; combating money laundering and the financing of terrorism; and consumer protection.
This communication is for supervised intermediaries, supervised entities, and those who operate in various capacities in decentralized ecosystems, including as users, as a reminder of the opportunities and risks associated with the use of decentralized technologies in finance and with crypto-asset operations, highlighting some important aspects for their safeguarding.
Crypto-assets, in particular, can generate various types of risks, mainly because they are still largely deregulated. The rapidly spreading use of these instruments could undermine the stability of the financial system as a result of the interdependence of regulated and non-regulated participating entities and the lack of controls and tools to limit the effects of adverse events. Against this backdrop, crypto-assets - of no intrinsic value, unrelated to any asset in the real economy or in the financial system, with no right for the owner to receive anything in return - cannot, as such, be suited to performing a payment or investment function. For this reason and because of their characteristic risks, their use should not be incentivized in any way.
Work is underway at the international and European level to design a new set of rules and controls for these products and their 'ecosystems', but their entry into operation will still take some time. Therefore, this Communication aims to provide a useful point of reference pending the final version of the European regulatory framework and beyond, also taking into account the fact that some actors and technological solutions will not be included in the scope of application of the new rules.
The Bank of Italy will continue to collaborate in the various international and European forums that deal with these issues and - together with the ECB and the other national supervisory authorities - to monitor developments in the crypto-asset market and changes in the use of decentralized technologies in finance, and to strengthen dialogue with market operators, mainly to promote initiatives for defining standards and good practices as a shared point of reference. The goal is to support the development of virtuous and adequately monitored innovation in the financial and payments system, in order to mitigate the risks that may ensue and to maximize any benefits to the advantage of the economic system and its components: consumers, households, firms and general government bodies.