the Government intensifies regulation on the crypto market

According to the new regulation of Italy, the government has decided to increase surveillance on the crypto market. Specifically, by introducing new measures to counter market manipulation and other financial crimes. 

According to the latest draft policy, the penalties for these crimes can range from 5,000 to 5 million euros (equivalent to 5,400-5.4 million dollars). Let’s see all the details below. 

Severe sanctions for market manipulation, the new crypto regulation of Italy

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.

According to the new regulations, Italy will intensify the supervision of digital asset markets to combat and punish insider trading and market manipulation schemes.

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

Approved for the first time in 2022, the regulatory framework MiCA of the European Union is putting blockchain companies in front of difficult choices.

In the meantime, decentralized finance protocols (DeFi) must decide whether to completely decentralize their networks or comply with anti-money laundering and identity verification (KYC) regulations of the framework.

Completely decentralized networks are exempt from MiCA reporting requirements. However, these protocols risk not meeting MiCA’s definition of a sufficiently decentralized network.

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

This implies that these DeFi protocols must be completely decentralized or accept that users must submit verification data, a difficult proposition for many network participants.

Changes in the business models of exchanges

The centralized exchange Binance recently informed its European customers that it was switching to a model that categorizes stablecoins as authorized or unauthorized.

Model therefore in line with the MiCA framework, and that users are gradually adopting the new system.

Richard Teng, CEO del colosso dell’exchange, ha anche osservato che Binance non sta rimuovendo queste stablecoin dai mercati spot. Tuttavia ne limita solo la disponibilità agli utenti europei per determinati prodotti.

Richard Teng, CEO of the exchange giant, also noted that Binance is not removing these stablecoins from the spot markets. However, it only limits their availability to European users for certain products.

In the same way, Uphold has made changes to remain compliant with the EU regulatory review and has announced the delisting of six stablecoins. 

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

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

The former Speaker of the United States House of Representatives, Paul Ryan, recently stated that stablecoins could help mitigate the shortcomings of the U.S. economy due to the debt-laden U.S. dollar.

Even Jeremy Allaire, CEO of the stablecoin issuer Circle, has expressed optimism about the future of stablecoins. In particular, he stated that he believes these will represent 10% of the money supply in the next decade.

New rules for the stability and security of crypto-assets

The European Banking Authority (EBA) has recently released a comprehensive package of technical standards and guidelines in accordance with the Markets in Crypto-Assets (MiCA) regulation. 

Providing thus a clear guide for asset-referenced tokens (ART) and electronic money tokens (EMT) throughout Europe.

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

On the contrary, the EMT maintain a stable value as they are anchored to fiat currencies and used for payments, similar to stablecoins.

The authority has outlined a series of guidelines for token issuers, emphasizing the need to have sufficient financial resources (own funds) to cover potential risks. 

Parameters are also established to identify if an issuer presents a higher degree of risk, which would require an increase in own funds reserves.

The EBA guidelines specify the procedure and the timing 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.