- Italy is reviewing its crypto regulations after Europol dismantled a money laundering operation that laundered the equivalent of around €700 million.
- Depending on the outcome of the review, crypto service providers may have to adopt stricter compliance practices or even restrict certain offerings.
The Italian Ministry of Economy ordered a comprehensive review of existing protections for crypto assets, particularly those held by retail investors. The review covers both direct and indirect crypto holdings and shows regulators’ concerns about the potential risks posed by increasing exposure to digital assets.
The authorities explainedthat the yield difference between Italian and German government bonds has narrowed in recent months and is approaching the level before the sovereign debt crisis.
Trigger of the investigation
The statement from a specially formed committee said:
“The risks associated with the proliferation of crypto assets could increase due to increasing interconnectedness with the financial system and regulatory fragmentation at the international level.”
One point of concern is “regulatory arbitrage,” where companies seek jurisdictions with looser supervision and then use “passporting” rights to operate across the EU. This leads to potential vulnerabilities in investor protection.
The review will examine in detail whether the existing regulations are sufficient. The review could introduce stricter investor protection rules for retail investors, whether they hold cryptocurrency directly or indirectly through funds or derivative products. It could lead to a move towards closer alignment with EU-wide regulatory standards in order to reduce the regulatory fragmentation that undermines the effectiveness of MiCA.
Italy’s move comes as European regulators are increasingly scrutinizing cryptocurrencies. In April, the bank pointed to specific concerns: volatile crypto assets like Bitcoin, increasing corporate exposure to cryptocurrencies and the increasing use of dollar-pegged stablecoins, which if they became “systemic” could create vulnerabilities.
Europol uncovers crypto fraud
Several EU police agencies, in collaboration with Europol, have dismantled a crypto fraud and money laundering network that included crypto exchanges and investment platforms. The criminals had laundered over €700 million in illegal funds, making it one of the largest fraud networks shut down in Europe to date.
The operation carried out by Europol Coordinated with national police forces from several countries, including Germany, Cyprus, Spain, Belgium, France and Malta, culminated in a series of raids, arrests and seizures.
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