The Reserve Bank of India (RBI) is urging countries to prioritize the development of central bank digital currencies (CBDCs) over private stablecoins , due to concerns that stablecoins could impact financial stability.
In its December Financial Stability Report, the RBI emphasized that CBDCs help maintain monetary unity and the integrity of the financial system, while positioning them as the ultimate payment asset and foundation of monetary confidence.
- RBI wants to prioritize CBDCs over private stablecoins.
- CBDCs are seen as the ultimate payment asset, bolstering confidence in the currency.
- Stablecoins could open a new risk channel for financial stability, especially during times of market stress.
RBI's recommendations on CBDCs vs. stablecoins
The RBI argues that countries should focus on CBDCs to protect monetary confidence and financial stability, rather than relying on privately issued stablecoins.
In its December report, the RBI stated that CBDCs can maintain monetary unity and the integrity of the financial system. The agency stressed that CBDCs should continue to play the Vai of the ultimate payment asset and be the cornerstone of monetary confidence.
RBI concluded: Therefore, the RBI strongly recommends that countries prioritize the development of CBDCs over privately issued stablecoins to maintain monetary trust, secure financial stability, and build a faster, cheaper, and more secure next-generation payment infrastructure.
Financial stability risks from stablecoins
The RBI warns that stablecoins could create new risk channels for financial stability, especially during periods of market pressure.
According to the RBI, introducing stablecoins into the system could create risks, especially during market stress, exacerbating volatility or liquidation pressure. Therefore, the RBI believes that countries need to carefully assess the associated risks before expanding the role of stablecoins in their payment infrastructure.
The RBI emphasized the need for adaptation to each country's context: countries must carefully assess the relevant risks and develop policy responses appropriate to their own financial systems.
