Is this a crypto idea whose time has come?
As digital money evolves at warp speed, should India allow the regulated use of stablecoins? These digital tokens use the same ledger technology as privately minted crypto coins, but with a key difference: since they are pegged to a country’s fiat currency in a ratio of 1:1, they serve as a means of exchange, not investment. India’s broad crypto stance is a work-in-progress.
The central bank’s 2018 attempt to keep banks off crypto was quashed by the Supreme Court, the Centre’s 2022 tax on virtual-asset gains was taken by investors as a prelude to legitimacy, and a high court ruling recently recognized these assets as ‘property.’
Yet, crypto’s legal status is unclear. On its part, the Reserve Bank of India (RBI) has wisely erected a defence flank for the rupee in the form of a digital version designed to evolve with technology. Ever since America enacted its Genius Act of 2025 to permit private stablecoins, this question has arisen: So long as they are backed by equivalent sovereign assets held in reserve under watch, as the US law insists, can such e-tokens spark off a wave of fintech innovation? RBI would rather assign this role to its central bank digital currency (CBDC), the e-rupee.
Last week, its deputy governor T. Rabi Sankar said “stablecoins do not serve a purpose that cannot be done better with a CBDC” and that their launch “would create a lot of policy concerns and issues that are best avoided.”
Advocates of rupee-pegged stablecoins want these to be viewed not as threats to our fiat currency, but as enablers of innovative utility. Locally, they could snap into the Unified Payments Interface for ease-of-use; globally, they could aid cross-border transfers once CBDCs forge a network for conversion; but broadly, the stablecoin pitch seems based on a vision of AI-directed digital money. E-money can move as told. Use-cases range from ‘smart contracts,’ with funds released on the basis of commitments met by recipients, to public welfare doles that can be preset to be encashable only at approved outlets.
The potential is vast. While RBI’s e-rupee could indeed do what any stablecoin does, e-money is likely to evolve in better sync with needs if its path is led by competitive market forces. As rival tokens scout for users, rivalry would push them to innovate. Demand from donors keen on anonymity, for example, might attract a response of tokens minted for it.
What might the entry of stablecoins imply for monetary management? For financial stability, issuance could be kept within safety limits, with other rules applied just as strictly—like the US ban on issuers paying interest on holdings, a rule meant to restrain a flight of bank deposits. Platforms could report forex conversion so that our capital outflow limits aren’t overshot. Even so, it would entail risks that only RBI can assess.
A private scramble for stablecoin users could see money being lured away from banks anyway if awards get bundled into promotional packages. Worse, excessive or fraudulent token issuance going unchecked could distort RBI’s view of money supply and its policy calculus—a macro risk for the economy. All this argues for high crypto caution, or even a CBDC monopoly.
Our e-rupee, however, must be kept versatile and open to ideas. What if, say, the central bank starts taking ‘e-rupee deposits’? It could then on-lend this money to banks—at the rate it pays depositors—so that these lenders focus more on their core business of loan pricing. The efficiency of such a model could even be studied in a digital lab. And all that’s bold needn’t be rash.
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