The RBI official dismissed the benefits claimed by stablecoin proponents, noting that India’s existing payment infrastructure already offers efficient solutions. | Photo credit: REUTERS/Dado Ruvic
“Stablecoins do not conform to the two defining characteristics of modern money, namely (i) money as fiat and (ii) the unity of money,” Sankar said at the Mint Annual BFSI Conclave 2025 in Mumbai on December 12, 2025. “It is possible that in a stablecoin system there would be hundreds or more currencies in an economy making such a system inherently unstable.”
The RBI official dismissed the benefits claimed by stablecoin proponents, noting that India’s existing payment infrastructure already offers efficient solutions. “In the domestic space, real-time fast payment systems like UPI already enable fast, cheap and reliable payments, and there is no reason to believe that stablecoins would be superior from a cost, speed or reliability perspective,” he said.
Sankar identified multiple risks that stablecoins pose to the Indian financial system. “Widespread adoption of stablecoins would undermine the ability of central banks to control the money supply and interest rates,” he said, adding that they could lead to currency substitution and dollarization in emerging markets.
He believes the puzzle
The banking sector faces particular threats from the adoption of stablecoins. “To the extent that stablecoins replace bank deposits, banks would lose their role in financial intermediation,” Sankar said. “This would either result in a rise in credit costs as banks lose access to cheap deposits, or banks would have to rely on the Central Bank to provide the liquidity needed to finance credit.”
The RBI Deputy Governor also highlighted the loss of seigniorage revenue to governments. “Seigniorage, which is inherently a state revenue derived from the issuance of fiat money by the Central Bank, is thus diverted to private operators, often located outside the home jurisdiction, when stablecoins become dominated in a foreign currency,” he said.
Instead of stablecoins, Sankar advocated central bank digital currencies as the superior alternative. “CBDCs are digital tokens, just like stablecoins, yet they are inherently superior because they meet all the properties that money should have – fiat, singular, trusted and represent value – and don’t carry many of the risks associated with stablecoins,” he said.
He called on India to focus on four key principles: maintaining confidence in the national currency; protecting monetary sovereignty; encouraging responsible innovation through CBDCs, and ensuring innovation strengthens the regulated financial system.
“Do stablecoins serve a purpose? It seems to me that they do not; in any case, they do not serve a purpose that would not be better served by fiat money,” Sankar concluded.
Published on December 12, 2025
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