In a recent event, Reserve Bank of India Deputy Governor Rabi Sankar expressed his concerns about stablecoins, stating that they pose an existential threat to policy sovereignty.
According to the local news platform The Hindu, Sankar emphasized that stablecoins are primarily useful for a select few countries, such as the United States and Europe, where they are linked to their respective currencies.
However, he cautioned that in a country like India, stablecoins could potentially replace the use of the national currency, the rupee. Sankar highlighted the risk of dollarization if large stablecoins were linked to another currency, which could have implications for India’s capital regulations and monetary policy.
The Indian central bank deputy governor also pointed out that the transfer of profits made by the government through currency issuance to private players further amplifies the potential impact of stablecoins on the local economy. He stressed the need for caution in allowing such instruments, drawing on past experiences in other countries where stablecoins have jeopardized policy sovereignty.
These concerns expressed by Sankar align with the broader worries shared by emerging economies within the G20 forum. The G7 nations, representing advanced economies, have announced their intention to align with the forthcoming recommendations from the Financial Stability Board (FSB) on stablecoins.
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It’s not the first time that the deputy Governor of RBI has declared or considered Stablecoin threat creates the need for CBDC in the country.
