RBI flags stablecoin risks, urges countries to prioritise CBDCs over crypto

In its Financial Stability Report, RBI said central bank money must remain the ultimate settlement asset, warning that stablecoins pose macrofinancial risks and can weaken capital controls

The Reserve Bank of India has reiterated its cautious stance on crypto assets, including stablecoins, saying central bank money must remain the ultimate settlement asset and the anchor of trust in the monetary system. The central bank also advocated that countries should prioritise central bank digital currencies over stablecoins to preserve trust in money and maintain financial stability.

 

“RBI maintains a cautious stance on crypto assets, including stablecoins, prioritising sovereign digital infrastructure to safeguard monetary sovereignty amid global shifts and preserve financial stability,” it said in the Financial Stability Report, adding that central bank money preserves the singleness of money and the integrity of the financial system.

 

 

“It must remain the ultimate settlement asset, and it should remain the anchor for trust in money,” the RBI said.

 

Why does the RBI prefer CBDCs over stablecoins? 

The RBI said central bank digital currencies can deliver the benefits that stablecoins claim to offer, including efficiency, programmability and instant settlement, but with the credibility and safety of central bank money.

 

“The RBI, therefore, strongly advocates that countries should prioritise central bank digital currencies over privately issued stablecoins to maintain trust in money, preserve financial stability and design next-generation payments infrastructure that is faster, cheaper and secure,” it said.

 

What risks does the RBI see from stablecoins? 

According to the RBI, while stablecoins have gained attention in recent years and their issuance has grown rapidly, their size remains low relative to the wider crypto asset market capitalisation. “Currently, risks from stablecoins to macrofinancial stability outweigh their purported benefits. In their short history, stablecoins have proven to be volatile and vulnerable to confidence shocks and structural fragilities,” it said.

 

The RBI added that wider adoption of stablecoins can create new channels of financial stability risks, particularly during periods of market stress. “To mitigate risks posed by their rapid growth, it is vital that jurisdictions carefully assess the attendant risks and determine policy responses appropriate to its financial system,” it said.

 

How could stablecoins affect capital flow management in India? 

The RBI said stablecoins can circumvent controls on capital movement and complicate macroeconomic management, especially in emerging economies such as India where capital flow management frameworks play a key role in preserving external sector stability.

 

The central bank cautioned that stablecoins, like other crypto assets, can be used to bypass the current system for transferring foreign exchange in and out of the country, impeding the effectiveness of capital flow management frameworks.

 

What is the status of RBI’s CBDC pilot? 

The RBI has repeatedly expressed discomfort with crypto assets and stablecoins, saying these private virtual assets can undermine financial stability and monetary sovereignty. Instead, the RBI has been promoting the CBDC and is running pilot projects in both retail and wholesale segments, though it is not in a hurry to roll it out nationwide.

 

Recently, the RBI said the number of retail CBDC transactions has crossed 120 million, with the total value exceeding ₹28,000 crore so far.

 

The RBI said progress on the retail CBDC pilot is broadly in line with expectations, with ongoing work focused on programmability, coordination with state and central governments, specialised products for banks, and enabling cross-border payments. A little over 8 million users are currently using the CBDC.