Stablecoin Threat: Italian Central Bank Sounds Alarm Over Potential Shift Away from Traditional Bank Deposits

The Italian Central Bank has sounded an alarm about the growing threat of stablecoins to traditional bank deposits. The concern is that American-style regulations, which allow interest payments on stablecoins, could draw funds away from banks and into these digital currencies. This would have serious consequences for the entire economy, as banks rely heavily on deposits to fund their lending activities.

According to a recent study by the Bank of Italy, the rules governing stablecoins in Europe and the US differ significantly. The European Union's MiCA regulation prohibits interest payments on stablecoins, making it difficult for them to compete with traditional bank deposits. In contrast, the GENIUS Act in the US only restricts interest payments by the issuer of the stablecoin, leaving other operators free to offer competitive returns.

The Bank of Italy warns that this disparity could put American-style stablecoins in direct competition with traditional bank deposits, potentially leading to a significant shift of funds away from banks. This would have far-reaching consequences for the entire financial system, including the ability of banks to provide credit and the overall stability of the economy.

To mitigate these risks, the Bank of Italy recommends that European banks innovate by offering digital versions of traditional deposits on blockchain technology, combined with modern payment infrastructure. This approach would allow them to compete effectively with stablecoins while maintaining the regulatory advantages of traditional bank deposits.