Italy Sounds Alarm on Trump-Driven Crypto Frenzy—Could It Topple Traditional Finance?

Rome raises red flags as speculative mania floods digital asset markets—regulators scramble to prevent a ’wild west’ scenario.

While retail investors pile into meme coins and leveraged positions, Italy’s central bank warns of ’contagion risk’ to legacy systems. One official quipped: ’When the SEC falls asleep, Wall Street’s nightmares begin.’

The real threat? A crypto crash that makes 2008 look like a speed bump—with zero bailout options for decentralized wreckage.

Italy Sees Financial Fragility in Growing Role of Bitcoin and Stablecoins

According to the report, a significant share of Bitcoin is now held by ETF issuers, trading platforms and non-financial corporations. These entities are either betting on Bitcoin as a stock-price enhancer or using it to reshape business models, despite its high volatility.

Many operate outside traditional regulatory frameworks, especially in the US, China, Canada and the UK. Their limited presence in the eurozone has so far insulated European markets, but Italian regulators warned that contagion risks are growing.

The report also raised concerns about the dominance of dollar-based stablecoins such as Tether and USD Coin. If such instruments become systemic, their issuers’ heavy reliance on US government bonds as reserves could trigger market instability during redemption crises.

EU Authorities Monitor Offshore Crypto Exposure as Stablecoin Risks Mount

The central bank warned of a potential liquidity crunch in the event of a large-scale stablecoin failure, with spillover effects that could reach both US bond markets and global financial systems.

European officials have echoed those concerns. ECB President Christine Lagarde said in April that MiCAR, the EU’s landmark crypto regulation, may not be strong enough to shield European financial institutions from fallout linked to a US-driven stablecoin boom. She warned that a mass shift of savings into dollar-pegged assets could weaken the euro area’s monetary sovereignty.

Meanwhile, Natasha Cazenave of the European Securities and Markets Authority added that though crypto remains a small slice of global finance, its growing entanglement with the real economy could soon amplify risks. Italian authorities said they are closely monitoring business models and liquidity practices of firms offering crypto-assets in both EU and offshore markets.

As European lawmakers move to strengthen rules under MiCAR, Italy’s warning points to the growing need for global coordination. Without it, national regulations may struggle to keep pace with the rapid global spread of crypto, especially as political support fuels faster adoption in major economies.

Without it, national frameworks could be overwhelmed by the rapid internationalization of crypto-finance, especially as political backing accelerates adoption in key economies.