Italy and Cryptocurrencies: creating ties among actors to seize opportunities.

Introduction.

Major events are catalysts for changes, even for cryptocurrencies. It is essential for Italy to create ties among actors to seize opportunities.

Just as the pandemic has accelerated the themes of teleworking and sustainability, inflation (which is a consequence of the pandemic) will be an accelerator of significant changes in the financial sector that have been happening and will arrive more quickly.

The adoption of cryptocurrencies is driven substantially by four main “vectors”, which for one reason or another, have found greater momentum during the last two years.

The possibility of making electronic payments even for non-bankable people In the world, we have 4 billion people without a bank account. But a sizable and ever-growing portion of these, we are talking about hundreds of millions of people, have a smartphone in their pocket and easily, for this reason, the need to make economic transactions on digital platforms.

On the other hand, in developing communities, the penetration of internet services and tools is much faster than that of banking services. This “gap” tends to be covered by financial services provided by non-traditional instruments. And cryptocurrency exchanges are a portion of these.

The protection of privacy and uncensorability of economic provisions This is the somewhat philosophical but also very practical motivation that guides the adoption of cryptocurrencies. More and more people, in fact, are choosing to have all or part of their savings stored on a distributed infrastructure that makes uncensorability its main characteristic, even if they don’t need it but delve deeper into the reasons that led to the technological solution.

Moreover, stories like that of the financing of Wikileaks to which the US government closed access to donations via credit cards are repeated, as is the possibility of Navalny’s party (opponent of Putin) being able to finance itself, and in general the protection of savings, just think of dictatorial regimes, can constitute a useful weapon to protect the population and political forces from government control when this is questioned.

The defense of savings.

Since Bitcoin was born, it has always been known that, at most, there would be 21 million of them in circulation. Not one more unless the “consensus” mechanism is broken, which is feasible but extremely extremely expensive, which would also make the investment useless since the network would lose value and with it the investment to break it.

In these 12 years, however, several sovereign central banks have decided to increase the quantitative mass of circulating money, including the ECB starting in 2015.

So, in countries where inflation is rampant (from Venezuela first to Turkey after), more and more people are buying assets that cannot be inflated or confiscated to safeguard their savings. Difficult to blame them.

The search for profits.

It is undeniable that many people, especially in the pandemic context where they have been working from home, have received “cash” incentives and, thanks to suggestions from forums and social media (such as Reddit), have used these incentives on non-traditional platforms (such as RobinHood) to orient themselves in the financial and crypto world. And the “network” effect has increased the resonance of the phenomenon, bringing thousands and thousands of users closer to new financial instruments.

So, even in the financial sector, Covid (and its consequences) act as a catalyst, accelerating movements that were already underway. The search for and adoption of virtual currencies is one of these, in a path, of course, dotted with ups and downs of measures, countermeasures, and consequences.

And while states like China have completely banned mining and transactions in cryptocurrencies, El Salvador has made it legal tender and launched a project to use the thermal energy of the volcano to power mining batteries.

Personally, I firmly believe that if it had been possible to block the phenomenon of cryptocurrencies, sovereign authorities would have done so years ago. The only reason why a phenomenon that takes away a piece of monetary sovereignty from central banks was not nipped in the bud is because it is essentially impossible to do so.

Therefore, considering that the reasons for the adoption of virtual currencies are on the rise, and the substantial impossibility of preventing their circulation, institutions would benefit from a more aware and mature approach to dealing with them, rather than simply going through the stages of grief (saying that “cryptocurrencies are bad” will not change the situation).

We are dealing with a sector in which innovation and competition are fierce, and are also played out in the field of regulatory frameworks, which determine how favorable a territory is to innovation.

If we do not want to remain mere users of services and solutions developed elsewhere, I believe it is essential for Italian authorities and institutions making decisions to have the necessary awareness to make the right choices. This is because the topic is decidedly innovative and extremely technical. Consider, for example, that the tools for controlling custodial and non-custodial wallets for Bitcoin are completely different.

That is why I believe that the most effective thing to do at this moment is to create bridges and relationships between institutions and economic actors that are already consolidated in other sectors, while in this one they are all to be created, and can help define a regulatory framework that is more akin to this technological sector and allows for a proper balance between, on the one hand, the necessary protections of the community as mandated by institutions, and on the other hand, promoting the development of healthy technological innovation.

In this sense, the Sandbox initiative was positive, as it allows initiatives to engage in dialogue with regulatory institutions regarding innovative proposals. This is the first step, but it is essential that the correct approach follows, one that is collaborative on the part of companies and universities to understand the goals of the institutions, and open on the part of regulatory authorities who must understand that we are in a world where technology has erased boundaries.

Similarly, the consultation on the ministerial decree on the register of operators was positive, as it allowed for the modification of article 2, which, according to the first draft, applied the decree even to those who accepted cryptocurrencies as payment for goods and services, although some aspects still need to be refined, and waiting four years is excessive.

The same listening-oriented approach will also be necessary for tax regulation, an aspect delegated to individual EU states, for which I have also proposed a bill with the collaboration of experts in the field. If our country consults operators and communities before legislating, it will avoid making unforgivable mistakes in this emerging industry, but it requires the necessary humility and willingness to listen in order to pool the competences and knowledge that are not lacking in our country.