Rome: Bank of Italy Deputy Director General Chiara Scotti on Thursday sounded the alarm about the risks posed by crypto assets in general, and stablecoins in particular. A stablecoin is a type of cryptocurrency whose value is supposed to be pegged to, and collateralized by, a reference asset, which can be fiat money or another cryptocurrency.

According to Ansa News Agency, Scotti emphasized the potential dangers stablecoins pose if not properly regulated. She highlighted concerns regarding financial stability, market integrity, consumer protection, and the smooth functioning of the payments system. Scotti expressed these concerns during an address to the Parliamentary Commission of Inquiry into the Banking, Financial and Insurance System.

Scotti warned that a loss of confidence in the ability of a stablecoin to maintain its value could lead to panic among users, resulting in a rush to cash out. Additionally, she pointed out the risk of stablecoins being used for illicit activities, such as disguising the origin of financial resources for money laundering and circumventing sanctions.