RBI chief says stablecoins threaten India’s monetary sovereignty

India’s central bank governor sees stablecoins as a risk to the government’s dominance of the monetary system.

Speaking at the G30 39th Annual International Banking Seminar in Washington DC, Reserve Bank of India Governor Shaktikanta Das said he had “very strong reservations about stablecoins”.

According to Das, stablecoins are “private money” that could undermine government sovereignty by allowing private issuers to dominate the payments ecosystem. He added that stablecoins offer more risks than advantages.

Instead, he emphasized the advantages of CBDCs, noting that they are backed by the government, offer guaranteed payments, and do not require any collateral. He argues that this makes them a safer and more reliable choice compared to the uncertainties of private stablecoins.

Das also noted that India’s ongoing CBDC pilot projects are receiving positive feedback and announced the RBI’s intention to integrate CBDCs with India’s Unified Payments Interface, a real-time payment system that processes over 500 million transactions per day.

India launched the CBDC pilot program for digital rupee in December 2022 with 16 participating banks to test use cases and also explore additional functionalities such as offline transactions and programmability features.

Das had previously highlighted that the programmability of CBDCs could play a game-changing role in terms of financial inclusion by enabling targeted distribution of funds. He reiterated this in his recent comments but emphasized that India is in no rush to launch the digital rupee as the RBI wants to thoroughly test its design, features and robustness before a full-scale launch.

The RBI governor’s comments come as reports have emerged that India may once again seek to ban private cryptocurrencies, including stablecoins. Last week, two anonymous officials told local media that regulators had consulted with key institutions and concluded that the risks of private cryptocurrencies outweighed their benefits.

India is currently working on a policy document that is expected to clarify its official stance on cryptocurrencies. Meanwhile, the country tops Chainalytic’s global crypto adoption index despite investors having to deal with a punitive tax regime.