Key Takeaways
- The Bank of Italy warns that the post-election crypto boom in the U.S. could pose new risks to global financial stability.
- Central bankers highlight the growing systemic relevance of U.S. dollar-pegged stablecoins.
- ECB leaders are ramping up calls for a digital euro to protect monetary sovereignty.
The Bank of Italy has joined a chorus of European financial authorities warning that the U.S.’s growing embrace of cryptocurrency could create serious global risks, both for investors and the broader economy.
In a new report , the Italian central bank flagged rising concerns about crypto’s influence in the wake of the U.S. presidential election, which saw markets rally amid optimism that digital assets would benefit from a friendlier regulatory climate under Donald Trump’s return to office.
Post-Election Crypto Surge Raises Red Flags
The report points to a sharp, but temporary, uptick in crypto market value following the election, with global prices climbing after new U.S. initiatives to promote dollar-based digital assets.
That surge was short-lived, however, by the end of March, the total crypto market had slipped to $2.75 trillion.
“After the new U.S. administration took office and following the announcement of its initiatives to promote the use of crypto assets, there was also a temporary but sharp increase in global market prices for these products, including highly speculative ones,” the Bank of Italy said.
The central bank warned that if crypto markets, especially volatile assets like Bitcoin (BTC), become more entangled with traditional finance, it could expose global markets and intermediaries to serious vulnerabilities.
Bitcoin, Stablecoins, and the Rise of U.S. Influence
Bitcoin represents over 60% of the total market, followed by roughly 30% in other unbacked crypto assets. Stablecoins, digital tokens pegged to fiat currencies, account for just 9%.
However, stablecoins, particularly U.S. dollar-pegged ones like Tether and USDC, concern European regulators the most.
The Bank of Italy said the growing appeal of these assets could eventually distort global capital flows, especially if dollar-backed stablecoins gain systemic significance.
“A scenario in which stablecoins pegged to the U.S. dollar attain systemic significance could generate exceptional demand for U.S. government bonds, which issuers commonly hold as reserve assets,” the report highlighted. “Should one of these issuers fail, a sudden wave of redemption requests could follow, triggering forced sales of these reserves,” the Bank of Italy said.
The eurozone could face its own set of challenges. The report warned that if euro-denominated stablecoins are introduced by U.S. firms, they could undermine local payment systems and weaken Europe’s monetary sovereignty.
Institutional Adoption Adds Pressure
While retail investors remain a major force in crypto, institutional players are increasingly shaping the market.
The Bank of Italy cited reports that a sizable share of Bitcoin is now held by ETF issuers and the treasuries of non-financial corporations treating it as a strategic reserve, despite its volatility.
Crypto-native firms, including exchanges with murky governance structures, also hold large amounts of digital assets.
Roughly three-quarters of these firms are based in the United States, with others operating out of China, Canada, and the U.K., but their presence in the euro area remains limited.
Meanwhile, European banks and financial institutions are beginning to explore distributed ledger technologies and decentralized infrastructure, often through partnerships with Big Tech firms, which could further accelerate crypto’s integration into traditional finance.
Europe Pushes Back With Digital Euro Plans
The Bank of Italy’s warning closely follows similar remarks from European Central Bank officials, who are doubling down on the need for a digital euro to protect the continent’s financial independence.
ECB Chief Economist Philip Lane recently warned that Europe’s heavy reliance on U.S.-based payment networks, like Visa, Mastercard, Apple, and Google, could worsen if dollar-backed stablecoins take hold domestically. He referred to this trend as “digital dollarization.”
Such a shift, he argued, would weaken the ECB’s control over monetary policy and inflation. “The digital euro is not just about modernization—it’s about securing Europe’s financial independence,“ Lane said.
ECB President Christine Lagarde has also called on EU lawmakers to fast-track the rollout of a digital euro, citing growing risks tied to foreign stablecoins.
Governing Council member François Villeroy de Galhau warned that the U.S.’s pro-crypto stance could destabilize global markets if left unchecked.
An official from the Bank of Italy confirmed to CCN that while Italy doesn’t have direct authority over crypto regulations, it is “echoing ECB concerns” and may issue formal recommendations.
They added that the stablecoin sector is still highly concentrated and fragile.
“The stablecoin sector remains limited and highly concentrated in two specific instruments (Tether and USD Coin), and concentrating investments on so few assets is a risk for investors.”
