RBI Governor Warns Stablecoins Pose Threat to India’s Monetary Sovereignty

Reserve Bank of India (RBI) Governor Shaktikanta Das has expressed significant concerns about the potential risks posed by stablecoins, labeling them as a challenge to the country’s monetary sovereignty. Speaking at the G30 39th Annual International Banking Seminar in Washington, D.C., Das articulated his strong reservations against these digital assets.

Das described stablecoins as “private money” that could undermine government control over the payment ecosystem, warning that they pose more risks than benefits. He emphasized the importance of maintaining government authority over the monetary system, particularly in the face of increasing private sector influence.

The Case for Central Bank Digital Currencies (CBDCs)

In contrast to stablecoins, Das highlighted the advantages of Central Bank Digital Currencies (CBDCs), asserting that they are government-backed and provide guaranteed settlement without the need for collateral. This, he argues, makes CBDCs a more secure and trustworthy alternative to the uncertainties surrounding private stablecoins.

Das also shared positive feedback from ongoing pilot projects for India’s CBDC, which aim to integrate digital rupees with the country’s Unified Payments Interface (UPI)—a real-time payment system that handles over 500 million transactions daily. The pilot program for the digital rupee was launched in December 2022, involving 16 participating banks to explore various use cases, including offline transactions and programmability.

Financial Inclusion Through Programmability

Das reiterated the potential of CBDCs to enhance financial inclusion, particularly through their programmability feature, which allows for targeted fund delivery. He emphasized that while the RBI is keen to explore these advantages, it is not rushing the digital rupee's rollout. Thorough testing of its design, features, and overall robustness remains a priority.

Regulatory Developments

The governor’s comments coincide with reports suggesting that India may consider a renewed ban on private cryptocurrencies, including stablecoins. Local media recently cited anonymous officials indicating that regulators believe the risks associated with private cryptocurrencies outweigh their benefits.

As the Indian government prepares a policy paper to clarify its official stance on cryptocurrencies, it’s worth noting that India currently ranks first in Chainalysis’ global crypto adoption index, despite a challenging tax environment for investors.

As discussions around digital currencies continue to evolve, the RBI’s cautious approach reflects a commitment to safeguarding the integrity of India’s financial system while exploring innovative solutions for the future.