The U.S.’ crypto-friendly stance could increase the level of risk in financial markets by deepening the connections between traditional finance (TradFi) and the digital asset economy, according to regulator the European Securities and Markets Authority.

“This crypto-friendly stance has the potential to accelerate crypto adoption, including by institutional investors,” a spokesperson for the European Union’s financial markets regulator said in an interview. “This would in turn increase interconnectedness and, failing relevant safeguards, risks of negative spillover effects between crypto and traditional markets.”

Since becoming president on Jan. 20, Donald Trump has ordered his administration to set up a bitcoin reserve and urged it to establish crypto friendly policies. The crypto market had already reacted positively to Trump’s election victory in November, and bitcoin (BTC) climbed to a record high around $109,000 on the day he was sworn in, CoinDesk data showed.

In a joint report published Monday, ESMA, the European Banking Authority and the European Insurance and Occupational Pensions Authority identified “volatile crypto-asset valuations, driven by expectations of U.S. deregulatory policy agenda; increasing interconnections to traditional financial markets,” as a key driver in financial markets.

Separately, Piero Cipollone, an executive board member of the European Central Bank urged for a digital euro, an ECB-backed digital version of the single currency, to substitute for crypto assets, which he described as being “highly volatile and speculative in nature.”

“Furthermore, the United States’ push to maintain the dollar’s global dominance through the promotion of stablecoins worldwide presents its own set of challenges,” he said.