Bank of Italy Warns on Multi-Issuance Stablecoin Risks

Chiara Scotti, Vice Director of the Bank of Italy, delivered a significant cautionary message at the Economics of Payments Conference in Rome on September 18, 2024. Her remarks focused specifically on multi-issuance stablecoins—digital tokens issued across multiple countries under a single brand. Scotti’s intervention represents one of the most explicit warnings from a senior European central banker regarding this emerging financial technology.

The Bank of Italy official acknowledged that while this multi-jurisdictional issuance architecture could potentially enhance global liquidity and scalability, these benefits come with substantial risks to the European Union’s financial system. Scotti’s comments reflect growing concern among European regulators about the cross-border nature of digital assets and their potential to circumvent traditional regulatory boundaries.

Scotti identified four distinct risk categories that multi-issuance stablecoins present to the European Union. Legal risks emerge from operating across multiple jurisdictions with potentially conflicting regulatory frameworks. Operational risks stem from the complexity of coordinating multiple issuers across different countries, creating vulnerabilities in settlement, redemption, and technical infrastructure.

Liquidity risks become particularly acute when stablecoin issuers operate across borders, as liquidity pools may become fragmented or subject to different regulatory requirements. Finally, financial stability risks represent the most significant concern, as problems with any single issuer—particularly those outside EU jurisdiction—could trigger contagion effects throughout the entire stablecoin ecosystem and potentially spill over into traditional financial markets.

The Bank of Italy vice director emphasized that risks become particularly severe when any issuer operates outside the European Union’s regulatory perimeter. Scotti stated that multi-issuance stablecoins should be “strictly limited to jurisdictions with equivalent regulatory standards” to protect the EU’s financial stability. This position aligns with the EU’s broader approach to financial regulation, which emphasizes the importance of regulatory equivalence and supervisory cooperation.

The warning comes as global stablecoin projects increasingly explore multi-jurisdictional issuance models to achieve scale and market penetration. Scotti’s comments suggest that European regulators view these structures with skepticism, particularly when they involve jurisdictions that lack robust regulatory frameworks comparable to those within the EU.

The Bank of Italy’s stance signals likely regulatory headwinds for multi-jurisdiction stablecoin projects seeking to operate within the European Union. Scotti’s warning may foreshadow stricter interpretation and enforcement of the EU’s Markets in Crypto-Assets (MiCA) regulation, particularly regarding stablecoin issuance and cross-border operations.

This position reflects broader concerns among European central bankers about maintaining financial stability in an increasingly digital and cross-border payments landscape. The comments suggest that EU regulators may push for more stringent requirements on stablecoin issuers, including potentially limiting operations to jurisdictions with regulatory frameworks deemed equivalent to EU standards.

The Bank of Italy’s warning represents a significant marker in the ongoing debate about how to regulate digital assets while preserving financial stability. As stablecoins continue to evolve and potentially achieve scale, regulatory authorities like the Bank of Italy are clearly signaling that financial stability concerns will take precedence over innovation when the two objectives conflict.