Bank of Italy Warns of Systemic Risks from Crypto Integration with Finance

The Bank of Italy has issued a warning about the potential systemic risks that could arise from the integration of cryptocurrencies with traditional financial systems. The central bank's April 2025 Financial Stability Report highlighted the increasing interconnectedness between digital assets and conventional finance, which could lead to market volatility. This concern is amplified by the positive stance of the Trump administration towards cryptocurrencies, which has led to a surge in crypto values following Donald Trump’s re-election. The report suggests that such policy alignment could encourage excessive risk-taking among financial intermediaries, increasing overall market exposure to highly volatile assets.

The Bank of Italy noted that the $2.75 trillion global crypto market, with Bitcoin accounting for over 60% and stablecoins just 9%, has reached a level of maturity that poses macroeconomic threats when paired with lax oversight. The central bank warned that if these instruments were to become more closely entwined with the traditional financial system, there could be greater vulnerabilities for markets and intermediaries. This warning comes as the Trump administration has softened regulations and promoted crypto adoption, causing unease among European financial regulators. U.S. regulatory authorities have reduced enforcement proceedings against crypto companies and even held crypto-related activities at the White House over the past months.

This regulatory shift has heightened concerns about the concentration of cryptocurrency power in a small number of U.S.-based companies. The Bank of Italy estimates that 75% of key digital asset companies operate in the U.S., with the rest spread across China, Canada, and the UK. The euro area has minimal representation. The report stated that these entities are not subject to specific governance requirements and may therefore have significant conflicts of interest. Italian regulators also expressed concerns about the rise of Bitcoin-based exchange-traded funds (ETFs) and corporate treasuries adopting Bitcoin to boost share prices, a practice popularized by firms like MicroStrategy. The Bank believes this trend may expose non-financial companies to undue volatility.

Stablecoins, particularly dollar-pegged ones like USDT (Tether) and USDC (Circle), are under scrutiny. Though meant to preserve a 1:1 ratio with the U.S. dollar, these assets are mostly supported by short-term U.S. Treasury bonds. A large redemption of stablecoins could trigger the rapid liquidation of U.S. debt obligations, potentially disrupting bond markets. The Bank of Italy warned that a widespread run on redemptions could set off a fire sale of U.S. government bonds and shake global markets.

In response to these concerns, the European Central Bank (ECB) has been accelerating its blockchain-based payment system to counter the dominance of dollar-backed digital assets. The project, announced in April, aims to support a central bank digital currency (CBDC) and reduce the EU’s dependence on foreign stablecoin infrastructure. The project is set to roll out in two stages. Despite the Bank of Italy’s warnings, Intesa Sanpaolo, Italy’s largest commercial bank, has been actively embracing digital assets. The bank revealed in January 2025 that it had purchased 11 Bitcoins, valued at approximately €1 million. It also underwrote Italy’s first blockchain bond in July 2024 and launched spot crypto trading from its proprietary trading desk in November.

The Bank of Italy’s core message remains consistent: volatility, governance issues, and market entanglement are growing threats. It views Bitcoin and speculative crypto-assets not only as a risk to individual investors but also as potential triggers for broader systemic instability, especially when linked to corporate balance sheets or state-backed initiatives. As the global financial landscape shifts under the influence of political support and investor enthusiasm, the Bank of Italy’s report underscores a simple but urgent message: crypto is no longer isolated—and its risks are no longer theoretical.