Stablecoins and the Future of Money: Insights from India
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In his keynote at the Mint Annual BFSI Conclave 2025, T Rabi Sankar, Deputy Governor of the Reserve Bank of India, explored whether stablecoins have a meaningful role in modern financial systems. His analysis balances the technological promise of digital tokens with the foundational requirements of money and financial stability.
Money has always relied on trust—either intrinsic value or a sovereign-backed promise to pay. Modern fiat money, whether physical currency or bank deposits, is issued by the state or under its authority, and is denominated in a single unit to ensure smooth trade. Cryptocurrencies like Bitcoin challenge this model, claiming to redefine money, yet they lack intrinsic value or an issuer-backed promise, making them speculative assets rather than money.
Stablecoins, pegged to fiat currencies and backed by reserves, are closer to money. They can store value and facilitate transactions. However, they remain private instruments, failing two key characteristics of modern money: sovereignty (fiat issuance) and singleness (a single, universal unit). Multiple private currencies in one system inherently introduce instability.
TWO
Proponents argue that stablecoins improve cross-border payments, financial inclusion, and innovation. While they can reduce settlement risk internationally, domestic systems like India’s UPI, RTGS, and NEFT already provide fast, low-cost, and reliable payments. Stablecoins depend on digital infrastructure, which limits their accessibility for unbanked populations. Moreover, current usage remains largely confined to crypto trading, rather than everyday economic activity.
THREE
In his keynote at the Mint Annual BFSI Conclave 2025, T Rabi Sankar, Deputy Governor of the Reserve Bank of India, explored whether stablecoins have a meaningful role in modern financial systems. His analysis balances the technological promise of digital tokens with the foundational requirements of money and financial stability.
FOUR
Stablecoins pose multiple systemic risks:
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Currency substitution: Potentially reducing demand for domestic fiat, particularly in emerging markets.
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Monetary policy weakening: Undermining central banks’ control over money supply and interest rates.
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Banking disintermediation: Replacing deposits with stablecoins reduces banks’ ability to create credit, increasing reliance on central banks for liquidity.
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Capital flow management challenges: Cross-border stablecoins complicate capital controls and external sector oversight.
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Seigniorage loss: Profits from issuing money, normally accruing to the government, could shift to private operators.
Even domestic-currency stablecoins carry vulnerabilities, including threats to monetary sovereignty, singleness, and financial system integrity. Risks are amplified in emerging markets but are not absent in advanced economies.
FIVE
India’s strategy emphasizes caution and domestic priorities. With an already efficient and inclusive payments infrastructure, stablecoins offer little added value. Instead, Central Bank Digital Currencies (CBDCs) are the preferred solution:
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Fiat-backed and single: CBDCs retain trust, stability, and regulatory oversight.
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Programmable and cross-border ready: Can achieve the efficiency and transparency claimed for stablecoins.
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Interoperable with fast payment systems: Linking domestic and international systems reduces the need for private alternatives.
India’s policy approach rests on four principles: preserving trust in national currency, safeguarding monetary and financial stability, encouraging responsible digital innovation, and strengthening the regulated financial system. Stablecoins, by contrast, fail to offer advantages that cannot be better delivered by fiat money.
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