Bank of Italy Prepares to Roll Out Crypto Guidelines for Payment Stability

• Bank of Italy to issue crypto guidelines aligning with EU regulations, focusing on payment stability via EMTs.
• Governor Panetta favors EMTs for preserving public trust in payments over ARTs, ensuring system stability.
• ECB’s Panetta highlights a cautious approach to rate cuts amid persistent services inflation and wage growth.

The Bank of Italy is gearing up to unveil guidelines following the European Union’s forthcoming crypto asset regulations. Governor Fabio Panetta revealed this initiative at the Italian Banking Association (ABI) meeting, highlighting the goal of ensuring the payment system’s stability.

Panetta underscored that the EU’s Market in Crypto Asset Regulation (MiCAR) designates electronic money tokens (EMTs) and asset-referenced tokens (ARTs) as appropriate for payment purposes. EMTs are tied to the value of a specified official currency, whereas ARTs derive their value from one or more assets.

He asserted that their evaluation indicates EMTs, issued by banks or electronic money institutions, are the only instruments capable of serving as means of payment while fully maintaining public trust. This preference for EMTs over ARTs highlights the central bank’s commitment to preserving trust in the payment system.

Additionally, According to Bloomberg, Panetta addressed ongoing concerns about service inflation and robust wage growth. At the ABI meeting in Rome, he acknowledged these worries but suggested they should be viewed in context, as services prices typically behave differently than goods prices.

He reiterated that recent data supports a gradual decrease in borrowing costs. Despite eurozone inflation dropping to 2.5% in June, the services sector’s inflation rate remained steady at 4.1%. This has led some European Central Bank (ECB) officials to be cautious about committing to further rate reductions.

ECB President Christine Lagarde recently indicated that the high growth in service prices might be offset by other factors, advocating for a balanced approach. Yannis Stournaras from Greece echoed this view, advising against overemphasizing the services inflation data.

Panetta also discussed wage growth, emphasizing that a detailed analysis could mitigate fears. He pointed out that previous key rate hikes are still impacting demand, production, and inflation, and will continue to do so in the coming months.

Central bank forecasts suggest that the effects of monetary tightening on prices will become more pronounced in 2024. Panetta concluded that the decline in inflation has enabled the start of easing monetary conditions. He noted that key interest rates will be reduced gradually, in tandem with the return of inflation to target levels, provided macroeconomic conditions align with the ECB Governing Council’s expectations.