Italy Prepares to Strengthen Surveillance on Crypto Markets as Part of Its Adherence to the European Union’s Markets in Crypto-Assets (MiCA) Regulatory Framework

As anticipated, Italy is preparing to strengthen surveillance on crypto markets as part of its adherence to the European Union's Markets in Crypto-Assets (MiCA) regulatory framework.

The Italian government is preparing to stiffen crypto market surveillance as part of the country's adherence to the European Union's Markets in Crypto-Assets (MiCA) regulatory framework.

Under the new regulations, Italy will heighten supervision of digital asset markets to counter and penalize insider trading and market manipulation schemes.

The decree provides for sanctions ranging from 5,000 to 5 million euros (5,400-5.4 million dollars) based on the severity and extent of regulatory violations.

Initially approved in 2022, the EU's MiCA regulatory framework is presenting blockchain companies with difficult choices.

Decentralized finance (DeFi) protocols must decide whether to fully decentralize their networks or comply with the framework's anti-money laundering and identity verification (KYC) regulations.

Completely decentralized networks are exempt from MiCA reporting requirements. However, these protocols may struggle to meet MiCA's definition of a sufficiently decentralized network.

This is due to the use of foundations and other intermediaries that help moderate decentralized communities.

As a result, these DeFi protocols must either be fully decentralized or accept that users will need to submit verification data — a proposition that many network participants find unpalatable.

Exchange business models shifting

Centralized exchange Binance recently informed its European customers that it was pivoting to a model that categorizes stablecoins as either authorized or unauthorized.

The model aligns with the MiCA framework, and users are gradually being shifted onto the new system.

“Binance is not removing these stablecoins from the spot markets. However, it will be limiting their availability to European users for certain products,” Richard Teng, CEO of the exchange giant, noted.

Similarly, Uphold, in a bid to remain compliant with the EU regulatory审查, announced the delisting of six stablecoins.

These include Tether (USDT), Frax Protocol (FRAX), Pax Dollar (USDP), Dai (DAI), TrueUSD (TUSD), and Gemini Dollar (GUSD).

Despite the increasing regulatory pressure in Europe, many experts believe that stablecoins have a promising future, arguing that they could potentially prevent debt crises caused by the excessive issuance of fiat currencies.

Former United States House of Representatives Speaker Paul Ryan recently stated that stablecoins could help offset the weaknesses in the U.S. economy that are being driven by the debt-heavy U.S. dollar.

Even Jeremy Allaire, CEO of stablecoin issuer Circle, has expressed optimism about the future of stablecoins, saying that he believes they will constitute 10% of the money supply over the next decade.

New rules for the stability and security of crypto-assets

The European Banking Authority (EBA) has unveiled a comprehensive package of technical standards and guidelines in line with the Markets in Crypto-Assets (MiCA) regulation, providing clear guidance for asset-referenced tokens (ART) and electronic money tokens (EMT) across Europe.

The package spans six key topics, covering aspects from stress test programs and asset reserves to recovery plans. According to MiCA, ARTs are tokens that are backed by assets such as commodities, real estate, or a diversified basket of assets.

Meanwhile, EMTs maintain a stable value as they are pegged to fiat currencies and used for payments, much like stablecoins.

The authority outlined a set of guidelines for token issuers, emphasizing the need to maintain sufficient financial resources (own funds) to cover potential risks. It also establishes parameters to determine if an issuer presents a higher degree of risk, which would necessitate an increase in own funds reserves.

The EBA guidelines stipulate the procedure and time frame within which issuers must adjust their funds to 3% of the average reserve of assets classified as significant.

The implementation plan must be submitted within 25 working days, and compliance must be achieved within a maximum of six months.