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Italian Central Bank begins the Development of Ecosystem for Decentralized Finance

Italian Central Bank begins the Development of Ecosystem for Decentralized Finance

The Italian Central Bank (BCI) has announced that it has launched a pilot project for the development of an ecosystem for decentralized finance (DeFi), based on blockchain technology. The aim is to explore the potential and challenges of this innovation, which promises to make the financial system more efficient, transparent and inclusive.

DeFi is a set of applications and protocols that allow you to create and exchange financial services without centralized intermediaries, such as banks, stock exchanges or payment companies. Thanks to blockchain, which ensures the security, immunizability and traceability of transactions, users can access products such as loans, insurance, derivatives, currency exchanges and digital assets.

The BCI said it wanted to test the opportunities offered by DeFi to improve the efficiency and resilience of the Italian financial system, in line with the objectives of the national digital strategy. In particular, the pilot project will focus on three areas: the creation of a platform for the management and monitoring of financial risks; the development of a solution for tokenization and transfer of real assets; and the implementation of a scheme for verifying the digital identity of market participants.

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The pilot project will involve several public and private institutions, including the Ministry of Economy and Finance, the Revenue Agency, Consob, Ivass, ABI, ANIA, Assonime and various operators in the financial and technological sector. The BCI has specified that the project does not provide for the issuance or use of a central bank digital currency (CBDC) but will be based on tokens representing real or legal assets.

The BCI underlined the importance of promoting the development of DeFi in Italy, in a context of growing international interest in this innovation. The Bank also highlighted the risks and challenges that DeFi poses in terms of regulation, supervision, security, financial stability and consumer protection. For this reason, the BCI has stated that it intends to work with other national and European authorities to define an adequate and harmonized regulatory framework for DeFi.

The Bank of Italy recently announced that it has launched an innovative project to explore the potential of a central bank digital currency (CBDC). The initiative, called Progetto Leonida, is a collaboration involving 18 Italian commercial banks and the Italian Banking Association (ABI), the organization that represents the Italian banking sector.

The Bank of Italy, founded in 1893, is the institution that governs the nation’s financial stability, monetary policy, and overall financial system. By venturing into the digital field with a potential CBDC, the Bank of Italy demonstrates its dedication to embracing technological advances and adjusting its policies accordingly.

The Leonida Project, the product at the heart of this enterprise, will be based on a shared register for interbank payments. This system is designed to simplify payment processes between participating banks, potentially leading to greater efficiency and reduced transaction times in the financial landscape.

The Leonida Project, however, is not the first digital asset pilot to involve the ABI. The association previously launched the Spunta project three years ago, a scheme involving more than 100 banks and a shared register for reconciliations of interbank payments.

Despite this, the recent launch of the Leonida Project represents a significant milestone in CBDC exploration in Italy. Moreover, this company is not exclusive to Italy. There are several CBDC pilots currently underway across Europe, with recent ones involving the Bank of England and the Bank for International Settlements. These initiatives illustrate the growing interest in digital currencies among the continent’s financial institutions.

A representative of the Bank of Italy said: “With the launch of Project Leonida, we dive into the digital future, aiming to explore how blockchain can promote financial stability and protect consumers.” Last week, the Bank of England (BoE) and the Bank for International Settlements (BIS) successfully completed a collaborative project on CBDCs.

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