HomeBlockchainPilot crypto project with Bank of Italy

Pilot crypto project with Bank of Italy

Ever since the new crypto regulation came into effect, Bank of Italy has also been able to start approaching this sector. 

Bank of Italy and crypto

Banca d’Italia (Bankitalia) is the central bank of Italy, which is the one that once issued and managed the Italian Lira. 

Although Bank italia has been very skeptical of cryptocurrencies over the years, the bank has always been interested in the technology behind them, namely blockchain. 

Thus it has now decided to support an institutional pilot project in DeFi (decentralized finance) based on Polygon. 

Although Bankitalia has always been interested in blockchain, this recent initiative seems like a breakthrough in its often complicated relationship with cryptocurrencies. 

For instance, the new governor of the Bank of Italy, Fabio Panetta, who will serve starting 1 November 2023, has always been very much against cryptocurrencies, so much so that he said a couple of years ago that they have no reason to exist. 

However, Panetta will not be governor until November, and current governor Ignazio Visco seems slightly more possibilistic. 

Moreover, the pilot DeFi project is really about finance, and it will be developed on a classic blockchain like that of Polygon. 

Hence the turning point is quite clear, although under Panetta’s leadership the bank could still theoretically back out. 

The pilot project: bank of Italy, crypto and DeFi

The DeFi pilot project supported by Bankitalia involves Polygon Labs working together with innovation center Milano Hub and crypto infrastructure provider Fireblocks. 

https://twitter.com/0xPolygonLabs/status/1684276267229536265

The goal is to try to build an ecosystem of security tokens for decentralized institutional finance.

It is therefore a project aimed primarily at banks, asset managers and financial institutions, among which the Intesa Sanpaolo banking group stands out.

The experimentation will focus precisely on security tokens, and their interaction with a DeFi environment, so as to try to guide institutional players to operate in decentralized financial environments in full compliance with regulatory guidelines and requirements.

It’s all about the Milano Hub, or the Innovation Center of the Bank of Italy, which selected the “Institutional DeFi for a Security Token Ecosystem Project” to seek opportunities for financial institutions with DeFi and tokenized assets. 

This is a project developed by the CeTIF Advisory research center of the Catholic University of Milan, in collaboration precisely with Polygon Labs and Fireblocks, but also with Reply, Linklaters and DVRS. 

Polygon’s involvement is direct, while Bank of Italy’s role is only to provide the Milano Hub. 

The point is that institutional players need platforms that enable them to operate in full compliance with strict regulatory requirements, even if they are dealing with DeFi. One example of such platforms is Lionity, which is an institutional-grade automated market maker (AMM) for the security token secondary market, currently still under development.

According to Cetif Advisory General Manager Imanuel Baharier, it would be vital to create the conditions for DeFi to become a safe and open operating environment for supervised entities as well. 

He stated: 

“We are confident that tremendous benefits can be derived from such accessibility for the entire financial system in terms of security for institutional and professional operators, and in terms of opportunity, stability and resilience for the entire system.”

The Milan Hub

The Bank of Italy’s FinTech Milano Hub is a technology hub to support the development of innovation and digital transformation of the Italian financial system. 

It is a physical and virtual space in which public and private entities can collaborate on the development of initiatives aimed at fostering the digitization of the Italian financial system.

It is intended to be an innovative tool to stimulate experimentation and the implementation of novel initiatives in the field of FinTech, while also ensuring the achievement of the Bank of Italy’s institutional objectives, such as the stability and competitiveness of the system, the protection of customers and the reliability of the payments system.

The initiative was announced in 2020 by current Governor Ignazio Visco, with a commitment to support the development of a widespread and secure digital economy. 

According to the then Deputy Director General of the Bank of Italy, Alessandra Perrazzelli, this institutional open innovation project will make the banking and financial system embrace digitization and find the strength to change. 

It is quite obvious that new technologies related to cryptocurrencies and blockchain will now be included as part of such an initiative. 

The new regulatory framework

However, until 1 January 2023, which is the date on which the new Italian crypto regulation finally came into effect, institutions of such caliber could not take the risk of operating in a deregulated sector in which it would have been all too easy to fail to comply with some regulation, even unknowingly. 

Instead, the new regulations, along with the new European MiCAr that will come into effect next year, have made it much easier to be able to operate within the crypto sector without fear of ending up violating some regulation. 

In short, regulatory clarity is what has also made it possible for institutions to finally be able to enter the crypto sector as a major player.

Marco Cavicchioli
Marco Cavicchioli
Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded ilBitcoin.news and the Facebook group" Bitcoin Italia (open and without scam) ".
RELATED ARTICLES

Stay updated on all the news about cryptocurrencies and the entire world of blockchain.

MOST POPULARS