Bank of Italy: Cryptocurrencies Pose a Threat to Stability

The Bank of Italy has issued an official report warning about the rapid growth in crypto market capitalization.

The release marks a significant signal of how European financial regulators are beginning to evaluate their future approach to digital assets.

Cryptocurrencies and Financial Stability, According to Banca d’Italia

As of March 31, 2025, the total market capitalization of crypto assets reached $2.75 trillion.

According to the breakdown:

• 60% was held in Bitcoin
• 30% in other unbacked assets
• About 9% in fiat-pegged stablecoins 

In a tone typical of financial regulators, the Bank of Italy acknowledges the growing interest in digital assets, while warning of heightened risks tied to their rapid expansion.

The report focuses on: 

• Sharp volatility and instability of digital assets 
• Growing interest in crypto from traditional companies
• Concerns around stablecoins, particularly those pegged to the U.S. dollar

The Bank warns that the rapid surge in crypto market capitalization may have implications beyond investors. As digital assets become more integrated into the broader economy, their price swings could increasingly affect state-owned enterprises and the traditional banking sector. 

However, the most immediate risk lies with private firms holding crypto on their balance sheets. In the event of a sudden market crash, their treasury, accounting, and operational processes could face severe disruption.

The report also points to cases where cryptocurrencies were used as a marketing lever: some non-financial companies purchased Bitcoin to drive up interest in their shares. According to the regulator, this tactic leaves companies even more exposed to volatility. 

The commentary may serve as a cautionary signal to European businesses, implicitly warning against replicating the financial strategy of Bitcoin-focused corporations like U.S.-based MicroStrategy and Japan’s Metaplanet.

Read more in our feature: The Bitcoin Billionaire—How Michael Saylor Bet It All

Additionally, the Bank of Italy flags a key structural concern: a large share of the crypto market remains in the hands of unregulated players like trading platforms and custodians that often lack standard corporate governance practices. 

This, the report notes, increases the risk of financial misconduct and conflicts of interest.

The report also draws attention to the political influence on crypto markets, especially from the U.S. After Donald Trump’s election win and his open endorsement of digital assets, cryptocurrencies saw a sharp spike in value. 

The Bank of Italy argues that although this support may accelerate adoption, it also exposes investors to greater risk in the absence of clear regulation.

European Central Banks: A Spectrum of Views

Across Europe, central banks are taking divergent approaches to crypto, shaped by the specifics of their economies and their appetite for financial innovation.

Switzerland

Swiss National Bank Vice President Martin Schlegel stated that Bitcoin is not suitable for inclusion in the country’s foreign currency reserves, pointing to its extreme price swings and limited liquidity. In his view, the asset is inherently unstable. However, some members of Parliament advocate for a more open stance.

Czech Republic

Czech National Bank Governor Aleš Michl has floated the idea of investing part of the country’s gold and foreign currency reserves in Bitcoin. If implemented, the Czech Republic could become the first in the region to include crypto in its state assets. The European Central Bank responded with skepticism, warning of potential downsides.

United Kingdom

The Bank of England is weighing the introduction of a digital pound but is proceeding cautiously. Governor Andrew Bailey has acknowledged that tech firms are currently more agile and inventive than traditional banks. Without active engagement, he warned, digital currencies could evolve outside the reach of regulatory oversight.

Regulation and the Search for Balance

If cryptocurrencies continue to gain ground in the traditional economy, they will require closer scrutiny. This is particularly true for merchants using digital assets for payments and companies building strategic reserves by allocating treasury funds to Bitcoin.

The Bank of Italy insists that without clear rules and robust consumer protections, the market will remain a regulatory void.

Additionally, the regulator is pushing for greater international coordination. With some countries tightening restrictions while others remain more lenient, companies can relocate to more crypto-friendly jurisdictions to bypass oversight. A unified approach is essential to closing these gaps.

Cryptocurrencies are already embedded in the financial landscape. The task now is to ensure they don’t trigger the next crisis.

Related: Italy Moves to Rein In Crypto as EU, U.S. Rules Diverge