The European Central Bank (ECB) has highlighted the risks associated with cross-border regulatory arbitrage involving stablecoins, urging for a unified global regulatory framework. In its preview of the Financial Stability Review, the ECB noted that the market capitalization of stablecoins has surpassed $280 billion, representing about 8% of the total cryptocurrency market. Dominated by USDT and USDC, these stablecoins' reserve assets are now comparable to the world's top 20 money market funds. The ECB report warns that the widespread adoption of stablecoins could lead to households shifting bank deposits into stablecoin holdings, potentially destabilizing banks' retail funding sources and increasing funding volatility. Although the Markets in Crypto-Assets Regulation (MiCAR) prohibits European issuers from paying interest to deter such shifts, similar measures are being advocated for in the US. The ECB also cautions that the rapid growth of stablecoins and their integration with the banking system could result in significant capital outflows during financial crises. The report stresses the need for pre-access safeguards and global regulatory alignment to address the risks posed by cross-border multi-issuance mechanisms.