Stablecoins, CBDCs, and the RBI’s Selective Logic

At the Mint Conclave, RBI’s T. Rabi Sankar concluded his speech on stablecoins with a categorical verdict: “They do not serve a purpose that cannot be served by fiat money.” It was an unequivocal dismissal of privately-issued, sovereign-currency mimics. Yet this raises an awkward question: if stablecoins serve no purpose, what unique purpose is served by the central bank digital currency that the RBI itself has built, despite earlier doubts about whether a digital rupee was needed at all?

India has now witnessed two parallel debates; first on the CBDC, now on stablecoins. Both revealing a recurring divergence between North Block and Mint Street. During the CBDC rollout, the government projected the digital rupee as a flagship innovation, while the RBI responded with calibrated pilots and repeated assurances that it would not be rushed. In the stablecoin debate, the polarity has reversed: the government has signalled openness to examining stablecoins in a global context, while the RBI has issued its sharpest objections yet.

Why was the CBDC ultimately acceptable to the RBI despite its initial caution? The answer lies less in technology than in control. A CBDC is sovereign money in new packaging. It alters the interface, not the issuer. The digital rupee remains a central-bank liability, fully embedded within existing monetary policy and balance-sheet control. From the RBI’s perspective, that distinction is decisive.

This helps explain the RBI’s posture even after the government announced in Budget 2022–23 that a digital rupee would be launched within the year. The then Governor stressed that the RBI would proceed “carefully and cautiously.” The government emphasised innovation; the RBI emphasised prudence. That philosophical split now animates the stablecoin debate, albeit with roles reversed.

Stablecoins may be pegged to sovereign currencies, but they are not governed by the sovereign issuing that currency. They introduce private intermediaries, varied reserve structures, and cross-border mobility beyond central-bank control. To the RBI, this is not innovation but encroachment. Where the CBDC preserves monetary authority, stablecoins potentially dilute it. That asymmetry explains the sharper tone adopted today.

Yet the “profound question” posed at the end of Rabi Sankar’s speech i.e., whether stablecoins serve any purpose, deserves a more careful answer. Proponents argue that stablecoins move money at the speed of the internet rather than the speed of banking. More precisely, they enable functions that fiat currency, as currently structured, struggles to deliver: instant global transfers without banking intermediaries; smart-contract programmability; seamless integration across digital markets; 24/7 atomic settlement; micropayments and continuous money streaming; and global liquidity aggregation. In the US context, it is also acknowledged that stablecoins may increase demand for Treasuries, most needed now at a time of fiscal strain. Whether these features are desirable is a policy question; but denying their existence is analytically unconvincing.

Finance Minister Nirmala Sitharaman’s recent remarks make this divergence explicit. Speaking at the 2025 Kautilya Economic Conclave, Sitharaman noted that innovations such as stablecoins were reshaping global finance and that countries “cannot insulate themselves” from such shifts, warning that nations must “prepare to engage with them.” It was a clear signal that India should examine the stablecoin question rather than dismiss it. Against this “be sceptical but with an open-mind” stance, the RBI’s categorical rejection appears a little inordinate in both tone and timing. When one can afford not to jump the gun, why do so? That is ultimately a question of central-bank communication.

Rabi Sankar’s assertion can be read in two ways: as a rebuttal to strategic openness, or as an assertion of central-bank independence. In practice, it is likely both. The government looks outward, toward competitiveness and global relevance; the RBI looks inward, toward control and stability.

Globally, however, stablecoins are gaining traction. The more consequential question for India is not whether it should issue its own stablecoins, but what happens if others do, and India does not. If tokenised dollars or yuan become embedded in global trade, fintech platforms, and cross-border settlement, emerging-market users may gradually migrate to them. That raises uncomfortable possibilities: digital dollarisation, capital-flow leakage outside domestic controls, partial bypassing of local payment systems, and a gradual erosion of the rupee’s relevance in digital commerce. It may also, as US experience suggests, increase demand for sovereign debt in issuing jurisdictions.

This is not an argument in favour of stablecoins. It is an argument against outright rejection. Refusing to engage may simply accelerate dependence on foreign ones.

The RBI’s position thus confronts a structural dilemma. The digital rupee remains a controlled pilot with limited adoption. Global stablecoins, if they scale rapidly, may become embedded in payment networks. If India bans or indefinitely delays stablecoins, domestic innovation risks falling behind while global flows move elsewhere. If India is eventually forced to accommodate them under external pressure, it will do so reactively rather than strategically. The question, therefore, is not about technology but about who sets the rules of digital money.

The speech presents itself as an attribute-based, analytical examination of money and stablecoins, but repeatedly resolves tensions by shifting—often silently—to an issuer-based, sovereign-centric standard, creating several internal contradictions. It begins by defining money functionally as a trust-based social institution that can, in theory, be issued by any trusted entity, yet quickly collapses this into the assertion that only sovereign-issued money is credible or stable, without demonstrating why non-sovereign trust should be analytically disqualified. Similarly, while it states that all modern money is fiat and includes privately issued bank deposits, stablecoins are rejected primarily because they are “private money,” even when hypothetically meeting comparable conditions of backing, convertibility, and regulation. The treatment of “singleness” of money also shifts: it is first described as an outcome of settlement architecture and regulation, but later invoked as a precondition that stablecoins inherently violate, conflating plural instruments with fragmentation of the unit of account. The argument further oscillates between claiming stablecoins lack value, assets, or cash flows, and relying on their reserve backing to argue risks such as seigniorage loss, only to later claim that backing assets “do not matter.” Rhetorically, stablecoins are portrayed as both ineffective and marginal today, yet existentially dangerous if they were ever to work well, making the critique unfalsifiable. Seigniorage is moralised as a sovereign right when earned by stablecoin issuers, despite commercial banks already capturing similar rents through private money creation. Finally, risks of disintermediation, monetary control loss, and transmission impairment are deemed fatal when caused by stablecoins but largely dismissed when similar mechanisms arise under CBDCs, with regulatory design declared insufficient in one case and fully adequate in the other. Collectively, these tensions suggest the conclusion is driven less by the stated attributes of money than by a prior institutional preference for state issuance.

Rabi Sankar asks whether stablecoins serve any purpose beyond fiat money. Given the Finance Minister’s reminder that nations cannot insulate themselves, the more relevant question for India may be this: does refusing stablecoins serve a purpose that a regulated, conditional, and strategic engagement cannot?

In a world where money is becoming a networked technology, caution without engagement may itself become a source of vulnerability. India’s path might need to balance both imperatives and align RBI–Government messaging to avoid contradictory signalling.