- India’s central bank has sought to suppress crypto adoption and favors CBDCs over stablecoins.
- In its latest pilot, the central bank is exploring tokenized deposits.
- Finance Minister Nirmala Sitharaman has argued that India should adapt to new forms of money.
India’s courts and financial regulators have traditionally sought to suppress crypto in the country, restricting exchange activity and warning retail investors to stay away from digital assets. But in recent comments, Finance Minister Nirmala Sitharaman acknowledged that the government may have no choice but to adapt to stablecoins.
In another sign of the changing tide, the Reserve Bank of India (RBI) will join commercial banks in the country to pilot tokenized deposits, paving the way for new, blockchain-based payment rails.
Adapt to Stablecoins or Risk Exclusion, Sitharaman Warns
Speaking at the Kautilya Economic Conclave on Friday, Oct. 3, Sitharaman said stablecoins “are transforming the landscape of money and capital flows.”
“These shifts may force nations to make binary choices: adapt to new monetary architectures or risk exclusion,” she cautioned.
Sitharaman’s comments contrast with the position held by India’s central bank.
For years, the RBI has sought to suppress crypto adoption in the country. Although a 2018 circular prohibiting banks from servicing crypto companies was eventually struck down by the Supreme Court, the RBI remains broadly opposed to digital assets.
In a document recently cited by Reuters, the central bank warned that stablecoins risked fragmenting India’s financial infrastructure and weakening its existing digital payment system.
The report advised the government against creating legislation to regulate cryptocurrencies, which it said would grant them legitimacy and “may cause the sector to become systemic.”
Government officials generally align with this view. “While there is no ban [on crypto], we don’t encourage it,” Union Minister Piyush Goyal stated recently.
Stablecoins, CBDCs, and Tokenized Deposits
While the RBI takes a negative view of stablecoins, it doesn’t oppose digital money more generally.
India’s Central Bank Digital Currency (CBDC), the e-rupee, is already three years into a large-scale pilot spanning retail and wholesale transactions.
Meanwhile, the RBI’s latest pilot, revealed by Chief General Manager Suvendu Pati on Tuesday, Oct. 7, will see commercial banks explore tokenized deposits.
Tokenized deposits exist in the middle ground between stablecoins and CBDCs. They are privately owned and operated, but rather than treasuries and other financial instruments, they are entirely backed by bank deposits.
Other central banks also favor tokenized deposits over stablecoins.
Earlier this year, Bank of England (BoE) Governor Andrew Bailey said he would rather see banks tokenize deposits than issue stablecoins, which he warned could suppress the availability of credit.
In the end, however, Sitharaman may be right. With stablecoin adoption surging, countries that don’t adapt risk being excluded from a rapidly expanding digital economy that is already transforming how money moves around the globe.
