RBI’s Rabi Sankar Says Stablecoins Are Risky and Useless

Why India Is Treading Lightly on Stablecoins

Reserve Bank of India (RBI) Deputy Governor T. Rabi Sankar has warned that stablecoins could become a “systemic risk” without offering any real advantage over fiat money. His remarks echo a broader caution adopted by Indian policymakers, who are watching the global surge in dollar‑pegged tokens that now sit on a market cap north of $300 billion.

Macro‑economic Concerns at a Glance

• Monetary stability: Stablecoins could bypass the RBI’s interest‑rate tools.
• Fiscal policy leakage: Large‑scale token flows may erode tax transparency.
• Banking intermediation: Direct crypto wallets could sideline traditional banks.
• Systemic resilience: A sudden run on a high‑value stablecoin might trigger a liquidity crunch.

In short, policymakers see a “dual‑use” dilemma – while stablecoins promise faster cross‑border payments, they also open doors to illicit transfers and capital‑flight, something India’s capital controls aim to curb.

What the Data Says: Stablecoin Adoption vs. CBDC Trials

India’s own central bank digital currency (CBDC) pilot, e‑RUPI, already counts roughly 7 million active users. By contrast, adoption of private stablecoins remains marginal. A recent Statista report shows less than 1 % of retail crypto transactions in India involve stablecoins.

Real‑World Example: The US‑Dollar Pegged Tokens

Tokens such as USDT (Tether) and USDC have become de‑facto “digital dollars,” facilitating everything from remittances in Southeast Asia to DeFi lending on platforms like Aave. Yet their price stability hinges on the issuer’s reserve management, a factor that regulators worldwide are still scrutinising.

India’s Regulatory Landscape: A Balanced Approach?

Crypto exchanges in India must register with the Financial Intelligence Unit (FIU) and are subject to AML/KYC checks. Tax on crypto gains is enforced, but outright bans have not materialised.

When asked why the RBI doesn’t prohibit crypto trading entirely, Sankar replied that “different stakeholders’ views need to be taken into account,” signalling an ongoing policy dialogue rather than a hardline prohibition.

Pro Tip: Staying Compliant While Trading Crypto

1. Register on an FIU‑approved exchange.
2. Keep detailed transaction records for tax filing.
3. Monitor RBI circulars for any updates on stablecoin guidelines.

Future Trends: Where Are Stablecoins Headed?

1. Regulatory ”sandbox” trials: Countries like Singapore and the UK are creating controlled environments to test stablecoin use cases without compromising financial stability.
2. Hybrid fiat‑stablecoin models: Some issuers are linking tokens directly to sovereign reserves, offering a “transparent bridge” between crypto and central banking.
3. Interoperability with CBDCs: Central banks are exploring APIs that could let a CBDC serve as the backing asset for a regulated stablecoin, marrying the speed of crypto with the trust of fiat.
4. Reduced reliance on private stablecoins: As CBDC roll‑outs mature, the need for private alternatives may diminish, especially in economies with strong digital payment ecosystems.

FAQ

What’s Next for Indian Crypto Policy?

Analysts expect the RBI to release a comprehensive stablecoin framework within the next 12‑18 months. Until then, the prudent path for businesses and investors is to stay agile, monitor policy updates, and consider the emerging synergy between CBDCs and regulated stablecoins.