Italian Regulator Raises Concerns on Unregulated Crypto Markets, Joining the ECB and Other Regulators

Paolo Savona demanded swift action in regards to the currently unrestricted environment of cryptocurrency, insisting regulation must begin immediately.

By
Chung Yee
on
June 17, 2021
Category:
Blockchain News

Increasing Scrutiny Surrounding Crypto Regulation

The head of Commissione Nazionale per le Società e la Borsa (Consob), Paolo Savona, called for swift regulation of cryptocurrency markets on June 14th in the commission’s yearly report.  Consob is the Italian authority responsible for regulating the Italian securities market. In the report, the watchdog sounded the alarm on the unregulated crypto market. Savona cited the worsening of transparency as reasoning for their alarm, as it is the basis of legality and rational choice for market operators.


Savona Gets in Line

Savona joins the ranks of other regulators in the European Union to demand for a stricter regulatory framework to govern the cryptomarket. In an interview with Reuters in January, 2021 the President of the European Central Bank (ECB), Christine Lagarde called for regulation of Bitcoin and characterized it as a speculative asset. She further linked the use of Bitcoin to illicit activities, although Reuters pointed out she did not provide any specific examples. 

Echoing an almost similar approach towards the crypto market by other European nations, the chief regulator has also warned that criminal activities such as tax evasion, money laundering, funding terrorism and kidnapping could use cryptocurrencies as a shield. Italy as part of the European Union and the monetary policy and financial infrastructure proposed by the ECB would have a strong influence on Italy’s regulatory framework. 


Italy Sees Crypto Regulation as a Priority

In a report by Bitcoin.com on June 15th quoting the chief regulator, the publication reported Savona's reasoning behind his take on crypto regulation.

Savona said, “If it takes too long at a European level to come up with a solution, (Italy) will have to take its own measures.”

It is understandable why the authorities are pushing for a quicker regulatory solution. The rate of adoption of crypto assets has been taking place at breakneck speed. El Salvador has created history when it became the first sovereign state to recognize Bitcoin as legal tender, and the trend does not seem like it will be slowing down. 

Apart from stamping out criminal activities, regulation gives some form of certainty on how the financial industry will develop with the participation of players from the crypto market. New innovations such as decentralized finance (DeFi) networks like Binance Smart Chain (BSC) could have better and a more compliant framework that accounts for the unique structure of each protocol. Adopting regulations based on project attributes will give the regulators a clear overview of the activities that take place in that space.


Paving Way for the European Central Bank Digital Currency

The current clamor for stricter rules is understandable. The European Central Bank (ECB) in its report on June 2nd identified the risks in not adopting a payment solution that is more efficient and innovative. Placing a central bank in a position of control will address the concern of transparency raised by Savona. 


Governments around the world are coming to recognize that digital currency has its edge. There is better transparency in each transaction and resources such as time and costs can be cut to a fraction of what a normal transaction consumes today. China has been experimenting with its digital yuan, and the United States and United Kingdom have expressed their interest in developing Central Bank Digital Currencies (CBDC). The role of cryptocurrencies must be well-defined to ensure that the role of CBDC, if implemented in the future, is not diluted. This is why regulators like Savona are so concerned with the relatively free nature of cryptocurrency - they must account for their native economic assets and assure their value on a global scale.

How Will They Regulate?

The tone and strict stance taken by Consob will likely be reflected in its national regulatory framework if the European Union (EU) does not formulate a standard in the near future. There is a bigger picture that looms apart from the fear of criminal activities through the use of cryptocurrencies. Any large-scale adoption of a crypto asset that can play the role of a currency could undermine the state’s monetary policy, which could cause unforeseen issues in local economies.  In short - regulation needs to happen fast, and that will require synergetic solutions that address the unique variables a decentralized market contains.

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Chung Yee

Chung Yee has a legal background and has been involved in research works for the legal and compliance industry. Writing is his passion, centered on topics such as the blockchain and finance. His largest crypto holdings are Solana, Ethereum, and BNB Token.

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