The Reserve Bank of India (RBI) has raised an alarm about the potential dangers posed by privately-issued stablecoins, calling into question their impact on monetary sovereignty and public trust. In an assertive address, Deputy Governor T Rabi Sankar highlighted India’s proactive steps towards implementing a central bank digital currency (CBDC)—the e-rupee—positioning it as a trustworthy and efficient alternative in the evolving financial landscape.
The RBI’s Concerns Over Stablecoins
During recent discussions, T Rabi Sankar articulated the myriad threats posed by stablecoins, underscoring that these privately-issued digital currencies lack backing from monetary claims, which can lead to a dilution of confidence in the domestic currency. His statement struck a chord:
“We (at RBI) are looking at how the introduction of private digital means of payments (stablecoins) will impact the citizens, the economic agents, monetary policy transmission, and the business models of the service providers,” – T Rabi Sankar
This scrutiny arises from the inherent risks associated with stablecoins, including the potential for a ‘run’ on the issuer when public confidence evaporates. “In times of stress, such a run could create disruption for holders of such stablecoins,” Sankar cautioned, reinforcing the need for regulatory oversight in this soaring digital realm.
Given India’s already comprehensive payments landscape through mechanisms such as UPI, RTGS, and NEFT, the RBI questions the necessity and advantages that stablecoins might purportedly deliver. As Sankar aptly summarized, “We have seen that stablecoins lack the basic attributes of money; their advantages are neither unique nor unambiguous and their risks are all too real.” Thus, India’s financial policy must be navigated with caution, ensuring the national currency’s integrity remains intact.
Embracing the Digital Rupee: A Strategic Move
In stark contrast to the uncertainty surrounding stablecoins, the RBI’s e-rupee initiative embodies a well-structured approach to embracing digital currency while preserving monetary sovereignty. The strategy is defined by principles aimed at not only safeguarding the national currency but also steering innovation towards a regulated financial framework. As part of this endeavor, the e-rupee satisfies all essential attributes of money: it is fiat, trusted, and implements programmable features without the associated risks of private stablecoins.
Critical design considerations for the e-rupee include establishing its legal tender status, ensuring it complements physical cash, preserving privacy, and refining its operational structure. Sankar highlighted that the ultimate goal is a currency that integrates seamlessly into existing systems: “Achieving a balance between innovation, efficiency, and regulation is crucial for a successful digital currency initiative.” Therefore, the introduction of the e-rupee is positioned as a major step towards a modernized monetary framework.
Rapid Growth in E-Rupee Pilot Program
Since its launch in December 2022, the retail CBDC pilot has experienced vigorous growth, with transaction volumes soaring past 120 million and a cumulative value exceeding ₹28,000 crore (approximately $3.5 billion). Currently involving 17 banks and over 60 lakh users, this rapid expansion testifies to the RBI’s commitment to a future where digital currency plays a vital role in everyday transactions.
Notably, the pilot is expanding its functionalities by introducing offline capabilities for users in low-connectivity zones and programmability features aimed at facilitating conditional transactions—such as enabling direct benefit transfers to farmers. In a recent development, “Starting with the initial use cases of person-to-person (P2P) and person-to-merchant (P2M), the Reserve Bank expanded the CBDC-Retail pilot to include offline and programmability features during 2024-25,” said the RBI. This approach not only enhances the utility of the e-rupee but also mitigates potential barriers to entry for diverse user demographics.
Paving the Way for Cross-Border Innovations
As the global financial landscape shifts towards digitalization, the RBI is also exploring bilateral and multilateral CBDC pilot projects focusing on cross-border payments. The rush to create efficient and transparent payment solutions highlights India’s ambition to position itself as a significant player in the international CBDC arena. “The Reserve Bank is exploring the commencement of CBDC pilots on cross-border payments both on bilateral and multilateral basis to overcome key challenges related to turnaround time, efficiency, and transparency,” the annual report noted.
Such efforts align with broader G20 goals aimed at enhancing cross-border payment efficiency. By interlinking systems like the Unified Payments Interface (UPI) with partner nations, India is not just modernizing its financial toolkit but also actively working to reduce reliance on private digital alternatives for remittances—an endeavor that reinforces not only domestic priorities but also positions India favorably in the global economic dialogue.
A Vision for the Future: The Evolving Role of Digital Currency
The RBI’s decisive stance against stablecoins coupled with its robust advocacy for the e-rupee demonstrates a forward-thinking approach in managing digital finance. As evidenced by the growing adoption and innovative features of the e-rupee, India is charting a course that promises not just financial inclusion but also sovereignty in an increasingly digital-centric world. By fostering a payments ecosystem that embodies security, efficiency, and inclusivity, India is preparing for a transformative leap into the future.
As policy choices unfold, it’s clear that India is navigating the challenges and opportunities of digital currencies with an eye on both domestic priorities and global positioning. The decisions we make today regarding stablecoins and CBDCs will indelibly impact the integrity of our monetary system and the trust of the public—ensuring that the evolution of finance is both innovative and stable.
