The Reserve Bank of India’s Deputy Governor T Rabi Sankar has delivered a strong critique of stablecoins, arguing that they fail to meet the core attributes of money and pose significant risks to financial stability. Speaking at the Mint Annual BFSI Conclave 2025 in Mumbai on 1 December, Sankar said stablecoins do not serve any purpose that cannot be better fulfilled by sovereign fiat money.
In his keynote address, Sankar traced the evolution of money from commodities to digital balances, emphasising that trust, sovereign backing and singleness are the foundations of modern monetary systems. He argued that cryptocurrencies challenge this framework because they lack intrinsic value or a credible promise to pay, making them speculative instruments rather than money.
Stablecoins fall short of modern money
Sankar acknowledged that stablecoins differ from unbacked cryptocurrencies because they are pegged to fiat currencies and supported by reserves. However, he questioned whether stablecoin issuers make a legally enforceable promise to redeem at par and stressed that, even if they did, stablecoins would still constitute private money.
According to the RBI official, private issuance undermines two defining features of modern money, fiat backing by the sovereign and singleness, meaning all money trades at par. He warned that a proliferation of stablecoins could fragment the monetary system and introduce instability.
Supporters of stablecoins often claim benefits such as faster cross-border payments, improved financial inclusion and innovation. Sankar dismissed these arguments, noting that India already operates highly efficient payment systems such as UPI, RTGS and NEFT. He added that stablecoins remain largely confined to crypto market activity rather than real economic use.
The deputy governor outlined a range of risks linked to stablecoin adoption, including currency substitution, weakened monetary policy transmission, erosion of capital account controls and bank disintermediation. He also highlighted the loss of seigniorage income, arguing that profits from money issuance should accrue to the public, not private entities.
Sankar warned that these risks are particularly acute for emerging market and developing economies, but said advanced economies are not immune. He pointed to global policy discussions at the BIS, IMF and Financial Stability Board, which increasingly highlight the structural weaknesses of stablecoins.
For India, Sankar said the policy response should focus on strengthening public digital infrastructure rather than accommodating private digital currencies. He positioned central bank digital currencies as a superior alternative, arguing that CBDCs preserve trust, monetary sovereignty and financial stability while still enabling innovation.
Concluding his speech, Sankar said the real danger lies not in failing stablecoins, but in ones that work well enough to undermine the existing system. In his view, stablecoins ultimately do not have a meaningful role in the financial system.