RBI Flags Govt its Fresh Worries on Stable coins

The Reserve Bank of India (RBI) had raised fresh concerns over stable coins and said that any crypto asset pegged to the US dollar or any another global currency could undermine the Indian rupee.

Central bank officials have raised these concerns with the government in several meetings held recently, people aware of the development said. Stable coins are cryptocurrencies where value is derived from an underlying asset-USD or gold in most cases.

The fear is that going ahead, companies or traders could move to stable coins even for domestic payments. The RBI has said that if stable coins are allowed in India, they could even affect the central bank’s ability to control the currency fluctuations and volatility.

India has still not decided whether it wants to regulate or completely ban cryptocurrencies. A questionnaire sent to BI Wednesday did not elicit any response.

The RBI has said that many exchanges are already doing out anywhere between 10% and 12% interest rates on stable coin deposits similar to fixed deposits.

Industry trackers say that the RBI’s concerns may not be farfetched. “Currently regulations do not allow anyone to accept USD or any other foreign currency as mode of payment for domestic transactions-whether trade or salaries. The risk that stable coin could pose is that it could be used as a mode of payment, partial or full, and the RBI will not have any control over this,” said Amit Maheshwari, tax partner at tax consulting firm AKM Global.

Globally, regulators have been struggling to formulate policies around stable coin because the currencies do fluctuate much more than the paired currency due to demand and supply situation on an exchange.

The government is already discussing with stake holders whether cryptocurrencies should be completely banned or whether they should be allowed in a limited way where the Reserve Bank of India will primarily regulate them.

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *