The Bank of Italy has recently published a research paper addressing the regulatory hurdles posed by public blockchains in the financial sector. As the adoption of blockchain technology continues to rise, the paper highlights the critical decisions regulators must make regarding the integration of these decentralized systems into traditional financial frameworks. The publication provides the following information:
Analysis by the Bank of Italy
In its analysis, the Bank of Italy emphasizes the trade-offs that regulators encounter when considering the use of public blockchains by supervised intermediaries. The reliance on volatile native tokens raises significant concerns about the stability and security of financial services that utilize these technologies.
Potential Regulatory Approaches
The paper outlines two potential regulatory approaches.
- The first option suggests deeming public blockchains unsuitable for regulated financial infrastructure, thereby limiting their use.
- Alternatively, the Bank proposes allowing their integration while enforcing risk mitigation strategies, such as establishing business continuity plans and setting minimum standards for economic security.
Timeliness of the Discussion
This discussion is particularly timely, given the increasing scrutiny surrounding stablecoins and their implications for overall financial stability. As the landscape evolves, the Bank of Italy's insights will be crucial for shaping future regulatory frameworks in the blockchain space.
Recently, Igor Mandrigin emphasized the need for banks to transition to public Layer 2 networks to remain competitive, contrasting with the regulatory challenges highlighted by the Bank of Italy. For more details, see read more.
