Fabio Panetta, Governor of Bank of Italy, highlighted the growing risks and opportunities in digital finance during his recent speech, emphasizing the challenges posed by crypto-assets and the need for regulatory vigilance. He warned that the rise of unregulated digital currencies could threaten financial stability and called for Europe to strengthen its digital finance framework.

The Risks of Crypto-Assets

Panetta pointed out that while crypto-assets have so far had limited impact on the financial system, their increasing use for illicit activities and lack of investor protections make them a growing concern. He also highlighted that diverging regulatory approaches between the US and Europe could lead to risks of regulatory arbitrage, where companies exploit legal loopholes to engage in high-risk financial activities.

In his speech Panetta emphasized that a digital euro, properly regulated, would provide a secure alternative to private digital currencies. "Unlike crypto-assets, the digital euro would be backed by central banks, ensuring financial stability and public trust." He stated.

Cybersecurity and Operational Risks

Panetta also addressed the increasing cyber threats facing financial institutions. He stated, "With digitalization expanding rapidly, the risks to business continuity and consumer protection are growing," urging banks and regulators to enhance cybersecurity measures and ensure a robust digital infrastructure to prevent operational disruptions.

Policy Outlook and Conclusion

Panetta stressed that Europe must adopt a unified approach to economic challenges. Innovation, sustainability, and strategic autonomy are key to boosting competitiveness. "Italy, with its strong industrial base and financial resources, must pursue ambitious reforms to ensure long-term economic stability and growth." Panetta emphasized.

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