Recent statements by Finance Minister and RBI Deputy Governor signal India’s measured yet progressive stance on digital financial assets.

• The Finance Minister emphasised the need for nations to prepare for stablecoin adoption, on the other hand RBI indicated that it would wait for other countries to launch their Central Bank Digital Currencies (CBDCs) before expanding India’s retail rollout.
• The National Payments Corporation of India (NPCI) introduced biometric authentication for UPI payments in the Global Fintech Fest 2025.

What are Stable Coins ?

• Stablecoins are cryptocurrencies designed to maintain a stable value relative to a reference asset, typically a fiat currency like the US dollar, euro, or a commodity like gold.
• They aim to combine the transactional benefits of cryptocurrencies (speed, borderless use) with price stability similar to traditional money.
• Global Consensus: Institutions like the Financial Stability Board (FSB), Bank for International Settlements (BIS), and IMF define stablecoins as Virtual Digital Assets (VDAs) backed by transparent reserves.
• Efficiency in Payments: Stablecoins enable instant, low-cost, cross-border transactions.
  • According to Visa’s 2025 report “Making Crypto Real”, over $220 billion worth of stablecoins are in circulation, settling transactions in seconds at costs as low as $0.01 compared to $44 via traditional banking.

Types of Stable Coins

• Fiat-backed Stablecoins: Backed by reserves of fiat currency held by a central entity.
  • Each token is backed by an equivalent unit of fiat currency held in reserve.
  • Example: Tether (USDT), USD Coin (USDC).
• Crypto-backed Stablecoins: Backed by other cryptocurrencies as collateral (usually over-collateralized).
  • Example: DAI (by MakerDAO) backed by Ethereum or other assets.
• Algorithmic (Non-Collateralized) Stablecoins: Not backed by any asset; stability is maintained by algorithms that expand or contract supply based on demand.
  • Example: TerraUSD (UST) (collapsed in 2022, showing high risk).

What is the Central Bank Digital Currency (CBDC) ?

• CBDC is a digital form of a nation’s sovereign currency issued and regulated by the central bank.
• It represents legal tender, equivalent in value and backing to paper money.
• Example: India’s Digital Rupee (e₹) by the Reserve Bank of India (RBI).

Difference Between Stablecoins and CBDC

Global Context

• Institutional Momentum: Financial giants such as BlackRock, Fidelity, and Societe Generale have launched stablecoin projects, showing mainstream acceptance.
• Regulatory Frameworks:
  • EU’s Markets in Crypto-Assets Regulation (MiCA)  and the U.S. GENIUS Act now define reserve standards, consumer protections, and governance norms for stablecoins.
  • Stablecoins have evolved from speculative assets into regulated financial instruments.
• Global CBDC Coordination: The RBI’s cautious stance stems from the need for interoperability, digital currencies of multiple countries must function across borders for real-time trade and payments.
• Three-Layered System Emerging:
  • Blockchain Layer: Decentralised and auditable.
  • Reserve Layer: Backed by regulated institutions holding fiat or treasury reserves.
  • Interface Layer: Cards, wallets, and APIs integrating stablecoins into daily payments.

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India’s Evolving Stance

• Policy Shift: India’s approach is transitioning from regulatory caution to proactive engagement.
  • Finance Minister Sitharaman emphasised that India must be ready to engage with crypto assets, including stablecoins, to remain competitive in a fast-changing financial ecosystem.
• RBI’s Perspective:
  • RBI is not rushing CBDC rollout, preferring to align with global peers for coordinated cross-border systems.
  • The most appropriate use-case for CBDCs lies in cross-border transactions, ensuring efficiency and interoperability.
• Strategic Context:
  • Stablecoins, once experimental, are now part of institutional finance and cross-border settlements.
  • In emerging markets, they bridge gaps in financial inclusion; in developed markets, they enhance efficiency.
• Potential Integration: India’s UPI, Aadhaar, and Account Aggregator ecosystem could synergise with stablecoin networks to create interoperable, programmable finance.
• Strategic Balance: India’s twin-track approach,  embracing innovation with caution — seeks to harness digital finance benefits without destabilising monetary systems.

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