Innovation demand does not disappear when it is rejected: it simply moves elsewhere. The real challenge is to bring it back within a regulated framework.
When discussing the enabling conditions for fintech innovation, it is essential to distinguish between two dimensions: the regulatory framework and the system’s overall posture. In the crypto sector, Europe already has the framework in place. The Markets in Crypto-Assets Regulation (MiCA) has established a common legal perimeter for crypto-asset services. What is still missing—particularly in Italy—is the regulatory and industrial choice to use that framework to integrate innovation, rather than continuing to treat it as an anomaly to be kept at the margins.
A useful analogy helps illustrate the point. Twenty years ago, the entertainment industry responded to peer-to-peer file sharing primarily through enforcement. It proved ineffective: demand did not disappear but shifted toward illegal, unregulated channels offering little or no consumer protection. The market became competitive again only when legal alternatives became simpler, safer and more accessible than piracy. Innovation cannot simply be suppressed; it must be channelled into a better, lawful and well-supervised offering.
The comparison with crypto-assets has one important limitation—one that ultimately strengthens the argument. In the case of file sharing, the issue often involved copyright infringement. Investing in crypto-assets, by contrast, is legal. Moreover, demand is structural: it does not disappear because of moral persuasion. In Italy, crypto-assets are still frequently viewed as purely speculative instruments, akin to gambling or lacking social utility. Yet some crypto-assets—Bitcoin in particular—deserve to be assessed as investment assets rather than excluded from the regulated financial ecosystem. Discouraging legitimate demand across the board does not eliminate it; instead, investors are more likely to seek exposure elsewhere, through foreign providers or channels that are less integrated with the domestic financial system.
For Italy, the implications extend well beyond individual investors. When demand migrates outside the national regulatory perimeter, risk is not eliminated—it is simply relocated to areas where the domestic system has less visibility and less ability to supervise it. Investors remain exposed, but without the proximity of their trusted banking relationship, without a domestic chain of accountability, and often without comparable standards of custody, disclosure and investor protection. Along with that demand, transaction data, technical expertise, intermediation revenues, tax income and the opportunity to build a competitive domestic ecosystem of regulated operators also leave the country.
A cautious regulatory stance was understandable when no common framework existed. In 2014, the European Banking Authority (EBA) itself advised financial institutions to refrain from engaging in crypto-asset activities until an appropriate regulatory framework was in place. Today, however, MiCA provides that framework. The question is no longer whether crypto-assets should remain outside the regulated financial system, but how they should be integrated into it in an orderly manner. The enabling conditions therefore depend less on new legislation than on supervisory choices, implementation and market development.
From a regulatory perspective, consistency is essential. The European framework should be treated for what it is: a regulation that is fully in force, not one that remains theoretical. Effective supervision means bringing activities within the regulated perimeter, rather than pushing them beyond it.
From a cultural perspective, it is equally important to distinguish personal opinions—however legitimate—from the institutional role of the regulator. The purpose of supervision is to protect investors by overseeing markets, not by expressing value judgments about a particular asset class.
Finally, from the perspective of industry collaboration, banks and wealth managers should be able to offer regulated crypto services, including through partnerships with MiCA-authorised Crypto-Asset Service Providers (CASPs). In practice, this means segregated custody models, execution through authorised CASPs, integrated tax reporting, AML controls aligned with regulatory standards, proper training for advisory networks and clear, understandable disclosure for clients. This is how a compliant domestic ecosystem can be built—one that retains expertise, capital and value creation within the country instead of allowing the market to migrate to foreign intermediaries and placing Italian financial institutions at a competitive disadvantage within Europe.
The objective, therefore, is not to promote crypto-assets, but to govern a demand that already exists. The choice is not between prudence and innovation. It is between a form of prudence that supervises the market and allows it to develop in an orderly way, and one that pushes it into less transparent jurisdictions. For the Italian financial system, bringing crypto-assets within regulated channels means strengthening competitiveness in Europe while providing investors with the proximity, oversight and accountability that foreign operators cannot always guarantee.
Originally published on Fintech+ by IlSole24Ore
