The European Union Systemic Risk Board (ESRB) has urged for tighter regulations on stablecoins under the EU’s Markets in Crypto-Assets (MiCA) framework. The ESRB's report highlights the potential risks of the $308 billion stablecoin market, warning that non-compliant stablecoins could lead to disorderly outflows and liquidity issues in financial markets. The report emphasizes that reserves backing major stablecoins like USDT and USDC are primarily held in short-term U.S. Treasury bills, which may become illiquid during market stress, similar to the 2020 pandemic scenario. Additionally, the ESRB expressed concerns over the global dominance of dollar-pegged stablecoins and their implications for monetary sovereignty.