Stablecoins and Sovereignty: Why India Must Watch, Not Rush

The recently passed US Stablecoin Act, called the GENIUS Act, no less, is a sign of the times. Only in America could a financial regulation bill double as a humblebrag. The acronym epidemic seems to be in full swing again in the land of the bold and the branded.

It may not be making headlines in India, but the law’s long-term impact could be seismic. This isn’t just crypto regulation. It is a reset of monetary architecture, and a quiet battle over who holds the master keys.

By setting clear, federally backed rules for dollar-pegged stablecoins, the US is embedding the dollar deeper into the global financial system. With extraterritorial provisions, the message is clear: to serve US customers, follow US rules. It is monetary soft power, exported via API.

In other words, the US is digitally extending the dollar’s reach at a time when its value is wobbling but its ambitions aren’t. The GENIUS Act might be about consumer protection on the surface, but at its core, it’s a clever move in the great game of programmable currency. Monetary diplomacy, written in code. Dollarisation by stealth.

So where does this leave India?

There’s been a flurry of concern in policy and fintech circles: Are we being left behind? Should we rush out our own rupee-backed stablecoin or tokenised sovereign asset before the global stage is taken over? Could our delay cost us digital relevance? Or worse, monetary sovereignty?

It’s worth stepping back.

First, understand what the US is really doing. The dollar’s digital expansion is strategic, not accidental. Stablecoins, thanks to this Act, are no longer just crypto instruments; they’re becoming infrastructure. Cross-border payments, trade, even DeFi ecosystems will now increasingly orbit the digital dollar. That’s not just fintech; it’s a new kind of foreign policy, one stablecoin at a time.

But here’s the catch: the rupee is not the dollar — and it shouldn’t try to be one.

The rupee lacks global reserve status. That’s not a bug; it’s a design constraint. Pushing a rupee stablecoin onto the global stage without underlying demand is like launching a rocket without fuel. We risk wasting regulatory bandwidth, misallocating resources, and running into geopolitical headwinds.

And let’s not forget: stablecoins, for all their promise, remain largely untested at systemic scale. They have mostly thrived in speculative crypto markets, regulatory grey zones, and occasionally, as ways to bypass banks entirely. Is India ready to be the guinea pig for their mainstream debut? Our cautious stance — with CBDC pilots, regulatory sandboxes, and rigorous VDA norms- might not win us headlines, but it may have quietly saved us from a crypto-induced migraine.

To be clear: this isn’t about inertia. It’s about intelligent timing.

The GENIUS Act is bold, yes; but it's still one country’s blueprint. The global rules around stablecoins, covering anti-money laundering, data privacy, cross-border taxation, are still being scribbled in pencil. India has more to gain by participating in the rule-writing than by signing up early to someone else’s playbook.

Of course, if dollar-backed stablecoins become the default for global trade, remittances, and institutional settlements, Indian exporters, fintechs, and even banks may find themselves drifting toward US-regulated rails simply for efficiency. A rupee that’s technically robust could still be digitally sidelined.

There’s a fair argument that a well-designed, RBI-regulated rupee stablecoin could complement India’s digital public infrastructure—UPI, Aadhaar, e-KYC and more. It could boost settlement efficiency, enable programmable payments, and extend cross-border reach, on India’s terms.

But for that to work, India needs more than a tech stack. It needs leverage. And leverage doesn’t come from early adoption alone; it comes from strength, coordination, and not accidentally destabilising your own monetary policy in the name of innovation. Unlike the US, India cannot afford to gift the world a financial crisis and walk away with a shrug. It is not in a position to do so either.

India doesn’t need to choose between reckless speed and paralysing caution. There is a thoughtful middle path:

• Build frameworks, not products. Begin with consultation papers, sandbox pilots, and tight guardrails.
• Go bilateral. Experiment with tokenised rupee settlements through partnerships with select countries for trade and remittances.
• Leverage existing rails. Ensure any future rupee stablecoin plays well with UPI and India’s CBDC ecosystem, when the latter is ready to scale.
• Stay flexible. Don’t codify standards too early; let the use-cases and demand evolve first.

Avoid FOMO
The digital transformation of money is undeniably real. The GENIUS Act is a major waypoint. But India’s response must not be driven by FOMO. It must be guided by strategic clarity.

Stablecoins are not just fintech. The way the US is going about it, they are geopolitics in code. India must act, but with clarity, not haste. In digital finance, fast followers often outperform flashy pioneers. The game is long, the prize is sovereignty, and sometimes the smartest move is to wait: with eyes open, frameworks ready, and panic off the table.

And to the sceptics: be sceptical, but with an open mind.