Italy flags risks in $2.75T crypto rally tied to Trump-era stablecoin boom

Italy’s central bank has raised concerns about potential financial instability as the global cryptocurrency market cap surged past $2.75 trillion in March 2025, led by Bitcoin’s dominance and fresh political momentum from President Donald Trump.

The warning comes amid a sharp revival in digital asset valuations following Trump’s return to office and his administration’s perceived support for the crypto industry.

Bitcoin alone now makes up more than 60% of the entire market, with prices nearing their all-time high.

The renewed rally has been accompanied by a surge in stablecoin adoption, especially USDT and USDC, which are widely used as trading pairs on crypto exchanges.

Italian regulators fear this stablecoin growth could strain the global financial system, especially during times of market stress.

Trump fuels crypto resurgence with policy and media moves

The current bull run in crypto markets is closely tied to political developments in the United States.

Since re-entering office in January 2025, President Trump has promoted a more accommodative stance on digital assets.

The Trump Media & Technology Group, a company affiliated with the president, announced the upcoming launch of a utility token and integrated digital wallet to support its Truth+ streaming platform.

This announcement followed months of speculation about a Trump-linked token initiative, and coincided with the broader rally in digital assets.

Analysts suggest that the perception of a crypto-friendly administration is helping to attract institutional and retail capital back into the market.

At the same time, Trump’s appointment of pro-crypto regulators and the disbandment of a Department of Justice task force on crypto fraud have raised questions about the level of oversight in the world’s largest economy.

These developments are fuelling optimism among investors, while also drawing criticism from watchdogs and financial regulators globally.

Italy and the EU fear stablecoin spillover effects

Italy’s central bank has highlighted the growing risk that dollar-pegged stablecoins pose to international financial stability.

These digital tokens are largely backed by US.

Treasury securities, and officials warn that any mass redemption or sudden liquidity crisis could create ripple effects across sovereign bond markets.

A recent statement from the Italian authorities noted that stablecoins, while useful for liquidity and payments, represent a “channel of contagion” that could link crypto markets directly to the traditional financial system.

In particular, concerns are growing that the euro could lose relevance if stablecoin use continues to expand in Europe.

Despite the EU introducing the Markets in Crypto-Assets Regulation (MiCA), which aims to harmonise digital asset rules across member states, some policymakers feel that the current legal framework lacks the scope to address fast-moving developments in decentralised finance and cross-border token flows.

ECB President Christine Lagarde has previously stressed the need for coordinated global regulation, warning that “fragmented oversight” will not be sufficient to contain the systemic risks posed by digital currencies and private stablecoin issuers.

US regulation under Trump faces criticism

The US regulatory environment is also shifting under Trump’s leadership.

The president’s recent decisions, including removing certain crypto enforcement initiatives and backing a more lenient approach to stablecoins, have sparked controversy within the financial community.

A new legislative effort, the GENIUS Act, is also under review in Congress.

The bill proposes to create a national framework for stablecoin issuance and circulation but has been criticised by some lawmakers and economists for reducing the ability of federal agencies to respond to emerging risks.

Meanwhile, members of the Trump family have expressed public support for a new stablecoin venture.

This move has intensified scrutiny over potential conflicts of interest, as well as concerns over how closely politics and digital assets are becoming intertwined in the United States.

As crypto markets gain traction once again, European regulators are urging global coordination to prevent another potential crisis.

With digital assets now embedded in both political strategies and financial products, the call for robust international oversight is growing louder.