Stablecoins Threaten India's Financial Sovereignty: RBI Sounds Alarm

The Reserve Bank of India warns that the widespread adoption of stablecoins poses significant risks to India's monetary sovereignty and financial stability. Stablecoins' vulnerabilities and potential to undermine monetary control are highlighted. The RBI advocates for central bank digital currencies to maintain trust and stability in the financial system.

The Reserve Bank of India (RBI) has issued a stern warning about the potential risks stablecoins pose to India's monetary sovereignty and financial stability. In its latest financial stability report, the RBI emphasized the inherent vulnerabilities of stablecoins, which could jeopardize financial stability.

The central bank expressed concerns that widespread adoption of stablecoins, particularly those denominated in foreign currency, could erode monetary control and disrupt domestic monetary policy transmission. By presenting themselves as an alternative to traditional money, stablecoins fall short of the foundational monetary system requirements such as singleness, elasticity, and integrity.

While stablecoins claim to offer benefits of efficiency and instant settlement, the RBI suggests that central bank digital currencies (CBDCs) can achieve these advantages while preserving monetary sovereignty and financial stability. The central bank recommends countries prioritize CBDCs over private stablecoins to build secure and trustworthy financial infrastructures.

(With inputs from agencies.)