In the current debate on stablecoins and the imminent approval of the GENIUS Act by the U.S. Congress, it is useful to read what economist Paolo Savona wrote November 11, 2024, in the daily Milano Finanza.
Savona is not against digitalization in monetary affairs: as a matter of fact, he is in favor of the introduction of digital public currencies, such as the digital euro. However, the “tokenization of financial assets” in a decentralized format is something different, and should be strictly regulated, Savona warns.
“Cryptocurrencies and their derivatives continue to be legitimized without addressing the core issue: the use of Blockchain and/or DLT accounting, whose opacity clouds any understanding of their external auditability. A serious debate on this matter has yet to begin—even among economists (does this category still exist?),” Savona wrote.
“The genie released from the Aladdin/Nakamoto lamp has miraculously created a double-faced tool—a currency that can also serve as a financial instrument without a debtor at its origin. Once acquired by businesses and households using legal tender, it enters accounting ledgers that no one knows how to certify.
“This is not just a technical issue, but above all a political and social one: the creation and circulation of crypto reduces monetary sovereignty and skews income distribution, enriching the purchasing power of the few savvy enough to ‘mine’ it from a computer, while relatively impoverishing those who earn it by producing real wealth through labor. Curiously, this topic has not been included in the heated ‘ethiconomics’ debate surrounding artificial intelligence.”
He continues further on, “Trump appears to have gone so far as to declare that he would legitimize them as an official reserve of the dollar…. The underlying idea is not just to adopt Bitcoin, but to equate it with other cryptocurrencies, with the harmful consequence of undermining the global supremacy of the dollar and altering geopolitical balances among competing forms of governance. The monetary theory and practice we’ve been taught must be thoroughly re-examined—especially if we want to avoid crises of unmanageable proportions. If the United States and the rest of the world are unwilling to address the problem, Italy should step up—especially if it wants to truly honor Article 47 of the Constitution.”
More recently, Savona has warned that these private currencies could replace public money.
Paolo Savona, now 89, has been director of the Bank of Italy and several times a minister of the Italian Republic. He authored the first econometric model for the Italian economy and is currently head of the Stock Exchange regulator Consob.
