US legal backing for Stablecoin starts regulatory debate in India

Supporters say crypto can be used for purposes as varied as managing government subsidies and trade settlements

US President Donald Trump last week signed a law to create a regulatory regime for dollar-pegged cryptocurrencies known as stablecoins, cheering supporters of such digital assets and prompting a debate in India.

 

Stablecoins are designed to maintain a stable value by being pegged to a fiat currency like the US dollar or other assets, in contrast to the volatility seen in other cryptocurrencies. Tether and USD Coin, the most popular stablecoins, are backed by the US dollar in a 1:1 ratio. That means each stablecoin is intended to be backed by one US dollar in value. 

“Stablecoin promises instant txn (transaction), zero chargeback risks, immediate reconciliations and hence low cost in money movement. The value capture is now moving to storing money/currency, leverage and programmability of money…,” said Amrish Rau, chief executive officer (CEO) of Indian fintech major Pine Labs, on X. 

India has its home-grown payments system UPI (Unified Payments Interface) and the debate about using stablecoins is picking up. “We should use stablecoins for remittances to India. We are not saying that stablecoins should become currencies. Instead, we need a mechanism to accept or utilise stablecoins as a financial technology to move money to India,” said Edul Patel, cofounder and CEO of Mudrex, a crypto exchange platform. 

Likely uses include quick settlements between exporters and importers, secure access to funds for students, and payouts for insurance. However, India does not recognise stablecoins. 

 

“India is five to seven years behind in stablecoin adoption. UPI works so well that we don’t realise the need for them but stablecoins are simply one use case built on blockchain, which allows for decentralised applications,” said Mridul Gupta, founding partner, CoinDCX, another crypto exchange platform.

 

Stablecoins enable easy value transfer, offer stability in countries with volatile currencies, and support the development of financial services, he said.

 

Advancements in blockchain, a secure, decentralised, and immutable digital ledger, have made stablecoin transactions safe. “The blockchain infrastructure is permissioned and trustless, which means that you don’t need to do multiple verifications. Once a transaction gets initiated, the ledger settlement can happen instantly and can only happen if enough ledger balances are available,” Patel said. Monitoring such transactions is easier compared to traditional channels.

 

Sanjay Malhotra, governor of the Reserve Bank of India (RBI), has maintained the regulator’s long-standing view that cryptocurrencies pose risks to monetary policy and financial stability.

 

“Indian law does not differentiate between any kinds of tokens or cryptocurrencies. It categorises them as virtual digital assets (VDAs) under Section 2 (47A) of the Income Tax Act, 1961. Only after there is a categorisation in the definition of VDAs, meaning if stablecoins can be separated from other forms of crypto, could there be some regulatory recognition for stablecoins” said Navodaya Singh Rajpurohit, legal partner at Coinque Consulting and founder of Pravadati Legal.

 

That said, India’s central bank digital currency (CBDC) is supposed to be the answer to stablecoins. As of March 2025, the retail version of the CBDC was expanded to 17 banks and it has had six million users since its inception in December 2022, according to data from RBI’s annual report.

 

Its value in circulation was ₹1,016 crore at the end of March 2025, up from ₹234 crore in the same period in 2024. 

 

Retail CBDC has the potential to enable programmable transactions across domains, including government direct benefit transfer schemes. It can enable subsidies to be restricted to specific purposes such as food coupons, hospital bills, fertilisers, pesticides, and cross-border remittances.

 

Programmability allows entities to ensure funds in CBDC wallets are used for designated purposes, preventing misuse. The programmability can be on parameters like expiry date and geographical location, according to the RBI.

 

“There should be a very strong policy. Enforce reporting, enforce data sharing to the legal and law enforcement authorities whenever there is a case. There is a need to bring Indian players at par with global ones so that Indian users end up choosing home-grown players,” said Gupta of CoinDCX.

 

Others believe that narrowing the definition of cryptocurrencies to make them more palatable from a regulatory standpoint could help drive adoption.

 

“If we focus on stablecoins, primarily designed for cross-border money transfers, it becomes a very narrow definition. Regulators might be open to considering such use-case specific frameworks,” said Patel of Mudrex.