The Reserve Bank of India once again cautioned investors against stable coins, stating that any cryptocurrency assets pegged to the US dollar could be a threat to the Indian Rupee. Stablecoins are crypto-assets that peg their value to a traditional investment asset class such as the US dollar or gold.
The central bank has also flagged the issue to the government in several meetings held recently. It is of the view that stablecoins if are allowed in India, could impact the RBI’s ability to control currency fluctuations and volatility.
The government is still not able to decide whether to completely ban or allow cryptocurrency trading unhindered.
According to an Economic Times report, the RBI also expressed concerns over many exchanges giving 10-12% returns on deposits of stablecoins on lines of fixed deposits.
Experts are of the view that RBI’s concerns seem legit. They fear that wider adoption of such dollar or gold-pegged digital assets for domestic payments could have repercussions outside the control of the central bank.
Global regulatory agencies have been struggling to churn out rules regarding stablecoins are they are more volatile as compared to fiat currencies due to demand and supply dynamics.
The Indian government is still holding talks with stakeholders and industry leaders in order to reach a consensus over whether cryptocurrencies should be completely banned or regulated by the RBI.
RBI has been a muling a strategy to roll out a central bank digital currency (CBDC) to counter private cryptocurrencies. It held a meeting last week to discuss various aspects related to the CBDC and private cryptocurrencies, it said in a statement. The 592nd meeting of the central board of directors, held at Lucknow, was chaired by governor Shaktikanta Das.
A central bank digital currency is a sovereign currency in an electronic form and would appear as liability (currency in circulation) on a central bank’s balance sheet. A 2021 survey by the Bank for International Settlements (BIS) found that 86% of central banks were actively researching the potential for CBDCs, 60% were experimenting with the technology and 14% were deploying pilot projects.
