Europe’s financial risk regulator wants stronger regulations governing “multi-issuer” stablecoins.

At its meeting Thursday (Oct. 2), the European Systemic Risk Board (ESRB) said there should be stricter guidelines covering these coins, which are issued partly in the European Union and partly in other jurisdictions, according to a Thursday press release.

“[T]he general board stressed that third country multi-issuer schemes—with fungible stablecoins issued both in the EU and outside—have built-in vulnerabilities which require an urgent policy response,” the release said. “Members also took note that multi-function groups may operate under regulatory regimes which are much more lenient than for financial conglomerates, raising the question of divergent prudential standards.”

The ESRB’s warning echoes one from the European Central Bank, which is worried that the failure of multi-issuer stablecoins could lead to a run on reserves.

The ESRB met last week and passed a recommendation to prohibit “multi-issuance” stablecoins. The board’s guidance is not legally binding but will pressure governments in the EU to impose the limits or explain how their countries can still preserve financial stability without them.

Stablecoins are pegged to assets such as the U.S. dollar and typically rely on a one-to-one reserve of traditional funds to back their value. With the multi-issuance model, licensed stablecoin providers issuing coins in the EU need to maintain a local reserve in at least one member state while still issuing and managing reserves for functionally identical coins in other parts of the world.

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Meanwhile, Federal Reserve Governor Christopher Waller and Bundesbank President Joachim Nagel offered different points of view on stablecoins Monday (Sept. 29) at the Sibos conference in Frankfurt, Germany.

Waller said the private sector is better positioned to innovate than central banks, and that stablecoins offer an attractive way for people in countries beyond the United States to access dollar banking services.

Nagel, a member of the ECB governing council, said stablecoins present “previously unknown risks,” and that the “anchor role” of central bank money must be maintained.

Meanwhile, the reach of the $290-plus billion stablecoin market has begun to stretch “beyond cryptocurrency rails into mainstream payments and institutional finance,” PYMNTS reported Tuesday (Sept. 30).