RBI’s Sankar warns stablecoins add no value and carry systemic risk

Reserve Bank of India (RBI) deputy governor T. Rabi Sankar delivered a critique of stablecoins this month, arguing that they present “significant concerns” for monetary stability and financial system resilience while offering no utility beyond what fiat money already provides.

Sankar’s comments, made at the Mint Annual BFSI Conclave 2025 in Mumbai, reflect the RBI’s long-standing scepticism toward privately issued digital currencies and its preference for sovereign digital alternatives.

“Stablecoins do not serve any purpose fiat money cannot,” Sankar said, underscoring the central bank’s view that these instruments lack meaningful use in everyday economic activity and are largely used within crypto markets rather than in the real economy.

He warned that stablecoins could compete with domestic currency, weaken monetary policy transmission, and pose risks to fiscal and banking intermediation.

Sankar highlighted multiple classes of risk. Stablecoins, he said, could dilute monetary sovereignty by reducing demand for the local currency, heighten the threat of dollarization in emerging markets, and create channels for unmonitored capital flows that circumvent regulatory frameworks.

This, he said, complicates efforts to enforce capital controls and monitor systemic risks.

Sankar also dismissed arguments that stablecoins can bridge crypto markets and the real economy. Evidence so far, he noted, shows their role in the real economy is limited, and existing regulated systems already perform these functions without jeopardizing stability.

Against this backdrop, Sankar positioned central bank digital currencies (CBDCs) as a safer alternative.

He said India’s ongoing CBDC pilots show how sovereign digital money can deliver programmability and settlement efficiencies.

“CBDCs satisfy all the attributes money should have—fiat, single, trusted, and representing value,” he said, adding that India’s payments ecosystem already delivers much of the convenience touted by stablecoin proponents.

Sankar’s remarks come at a time when global regulators are wrestling with how to integrate stablecoins into formal financial systems.

While some jurisdictions, especially the US and the European Union, are moving toward clearer regulatory frameworks for dollar-linked stablecoins, India has taken a more cautious path, concerned about monetary policy disruption and systemic risk.

India currently permits crypto exchanges to operate after local registration and subjects gains from cryptocurrency trading to taxation, but remains wary of mainstreaming crypto assets due to their speculative nature.

A decision on whether to ban crypto trading outright remains under consideration, Sankar said, with policymakers weighing stakeholder views before finalizing an approach.