India’s Approach to Stablecoins Analyzed
India is taking a careful look at stablecoins – digital money that tries to hold a steady value, often tied to a traditional currency like the US dollar. Deputy Governor of the Reserve Bank of India, T Rabi Sankar, believes these coins pose risks to the country’s economy. He worries they don’t offer anything that regular money (fiat currency) doesn’t already do, and could cause problems.
Key Points
- Stablecoins risk illicit payments and capital control bypass.
- They don’t provide benefits over traditional, fiat currency.
- They threaten monetary stability and financial system resilience.
- India’s cautious stance differs from global regulatory trends.
- CBDCs (Central Bank Digital Currencies) are considered superior.
- CBDC pilots are underway, with over 7 million users.
Sankar explained that stablecoins could be used for illegal activities and to avoid rules about money. He also says they don’t offer advantages compared to regular money. The Reserve Bank is worried about how these coins could affect India’s economy.
Currently, companies that trade in cryptocurrencies in India need to register with a government agency to check for money laundering. Taxes are also paid on any profits made from buying or selling cryptocurrencies. Despite this caution, many people in India are still trading in these coins, particularly outside of big cities.
The Reserve Bank is exploring creating its own version of digital money – a Central Bank Digital Currency (CBDC). This CBDC is being tested in India and is already used by around 7 million people. The Reserve Bank is considering whether to completely ban crypto trading or not, taking into account everyone’s views.
“A cautious approach to new technologies is always the best way to protect a country’s financial future.”
