India’s Chief Economic Adviser, V. Anantha Nageswaran, warned that dollar-backed stablecoins will emerge as a “major issue” next year. During an event in Mumbai, the adviser noted that these digital currencies will create difficulties for countries managing their monetary systems, affecting monetary policy transmission and seigniorage benefits (profits from currency issuance).
The impact of stablecoins on monetary policy is debated as the global market for these assets surpasses $300 billion. Nageswaran highlighted that India faces less pressure to adopt them thanks to its fast payments network (UPI). However, he pointed out that stablecoins add a layer of direct competition for banks, both in financial intermediation and in attracting customer deposits.
Meanwhile, India seems determined to avoid specific laws for cryptocurrencies, fearing that their regulation would “legitimize” them and create systemic risks, according to an official document. Although the country charges heavy taxes on crypto profits, the Reserve Bank of India (RBI) maintains warnings that have frozen the banking system’s access to these assets, seeking to control the impact of stablecoins on national monetary policy.
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