The European Central Bank warns that stablecoins may pose risks to financial stability and calls for a globally coordinated regulatory framework.

According to a report by Bloomberg, the European Central Bank pointed out in the pre-release version of its financial stability assessment report on Monday: “Stablecoins are rising rapidly and may be widely used in new application scenarios, which could pose risks to financial stability in the future.” The report will be officially released on Wednesday.

One risk mentioned in the report is that if stablecoins are widely adopted, households may replace some of their bank deposits with stablecoins—“this would reduce a key source of funding for banks and make their overall funding more volatile,” said the European Central Bank.

With the passage of the US stablecoin bill Genius Act, banks and other financial institutions are expanding their stablecoin businesses, and the European Central Bank has issued the above warning. The bill establishes a new regulatory framework for stablecoins. According to the European Central Bank, the total market value of all stablecoins has reached a historic high, exceeding $280 billion.

These comments echo those of other Central Banks and regulatory agencies, as global regulators discuss revisions to the cryptocurrency holding rules for banks that will take effect next year. The European Central Bank again emphasized the “risks posed by cross-border regulatory arbitrage,” and added that “further coordination of regulatory frameworks globally is crucial.”

Regarding the stablecoins jointly issued in the EU and third countries (i.e., the so-called multiple issuance schemes) and their potential risks to EU issuers, the European Central Bank once again calls for “additional safeguards, setting the prerequisites that must be met before obtaining authorization for access to the EU market.” The European Systemic Risk Board is pushing for a ban on multiple issuance stablecoins in the region.