RBI Deputy Governor Argues Stablecoins Are Inferior to Fiat Money, Pose Systemic Risk to India
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Reserve Bank of India (RBI)
In his keynote address at the Mint Annual BFSI Conclave 2025, RBI Deputy Governor Shri T Rabi Sankar presented a firm policy stance against the integration of stablecoins into India’s financial system, arguing that they lack the fundamental attributes of money and introduce severe monetary and systemic risks. Unbacked cryptocurrencies are deemed merely “speculative bets” akin to gambling, with no intrinsic value or promise to pay.
Failure as Money: Stablecoins fail to meet the core attributes of modern money:
Fiat and Single: They are private money, failing to satisfy the defining features of fiat (sovereign promise to pay) and singleness (all money forms interchangeable at par), which is critical for stability.
Liability: It is unclear if stablecoins are the legal liability of their issuers or if they carry an unconditional promise to pay par value.
Risks to Financial Stability: Widespread adoption of stablecoins, particularly foreign-currency denominated ones, introduces multiple risks:
Monetary and Fiscal: They pose a core risk of currency substitution (dollarisation) and undermine the RBI’s ability to control money supply and interest rates. They also lead to the loss of seigniorage income, a sovereign revenue, to private issuers.
Banking Disintermediation: Stablecoins replace bank deposits, forcing banks to rely on costly central bank liquidity to fund credit, undermining their core function of intermediation.
Capital Account Management: The pseudonymous nature of blockchain transactions complicates the implementation of Capital Flow Management (CFM) measures, diluting external sector oversight.
Benefits Rejected: Proponents’ claims of improved cross-border efficiency or greater financial inclusion are rejected, as India’s existing Digital Public Infrastructure (UPI, RTGS, NEFT) already provides superior, safer solutions.
What is Seigniorage Income? Seigniorage income is the profit earned by a sovereign government from issuing currency. Stablecoin issuance diverts this income, which is inherently a sovereign revenue arising from the issuance of fiat money by the central bank, to private, profit-making entities.
Policy Relevance
India’s policy must prioritize safeguarding monetary sovereignty and macro-financial stability against these severe risks. The strategy should reject stablecoin integration and focus on four key principles: preserving trust in the national currency, safeguarding monetary sovereignty, encouraging responsible innovation through CBDCs and interoperable payment systems, and ensuring that innovation strengthens, rather than bypasses, the regulated financial system.
Relevant Question for Policy Stakeholders: How will the RBI accelerate the domestic and cross-border adoption of the Central Bank Digital Currency (CBDC) to effectively counter the perceived market appeal of private stablecoins?
Follow the full news here: Stablecoins – Do They Have a Role in the Financial System