Bitcoin

ECB Warns of Risks from Crypto Assets and Impact on Trust in Banks

Fabio Panetta, Governor of the Bank of Italy and a policymaker at the European Central Bank (ECB), has called for close monitoring of the reputational risks banks face when offering crypto asset services, warning that losses in this sector could erode customer trust.

Presenting the Bank of Italy’s annual report, Panetta cautioned against the growing links between the crypto world and the traditional financial system, highlighting the increasing number of agreements between banks and digital asset providers.

He stated, “Crypto asset holders may not fully understand their nature and may confuse them with traditional banking products, which could negatively affect confidence in the credit system in the event of losses.”

In January, Intesa Sanpaolo — Italy’s largest bank — conducted what its CEO, Carlo Messina, described as a “test” by purchasing €1 million worth of Bitcoin, the world’s largest cryptocurrency.

The Intesa Group launched its own digital asset trading platform in 2023 and began handling spot crypto transactions last year.

Meanwhile, Spain’s Banco Santander is exploring broader involvement in digital assets, including early-stage plans to issue a stablecoin and offer cryptocurrencies to retail clients through its digital banking arm.

Panetta also warned that stablecoins — designed to maintain a fixed value against fiat currencies or assets — pose a threat to traditional payment systems, particularly if promoted by major foreign tech platforms.

“In the absence of proper regulation, the suitability of crypto assets as a means of payment is highly questionable, to say the least,” he said.

Nevertheless, the central bank governor stressed that it would be naive to believe that the spread of crypto assets, including stablecoins, can be curbed simply by imposing restrictions.

“What is needed is a response commensurate with the ongoing technological transformation,” he added, noting that “the digital euro project stems precisely from this need.”

The European Central Bank is currently developing a digital euro to compete with private alternatives that could undermine the role of central bank money.