are susceptible to wild intraday swings, stablecoins remain tightly coupled to the underlying fiat currencies, most notably the U.S. Dollar .
The official from Reserve Bank of India stated that stablecoins are only useful to western economies. Most of the current stablecoins are tethered to the U.S. dollar or European currencies. On the contrary, in a country like India, they could lead to dollarization and dwarf the usage of Indian Rupee.
“It’s essential for major economies worldwide to embrace stablecoins denominated in their own currencies in order to prevent the shift of trade and cross-border remittances to alternative currency-backed stablecoin.” However, this was not the first time the RBI raised the threat that stablecoins posed to monetary and capital regulations.of June 2023 underlined the weaknesses of stablecoins in light of the recent collapses and redemption pressures. The report stated that their purported benefits like financial inclusion and faster, cross-border payments were yet to come to fruition.
Continuing its attack, the central bank cautioned that the decentralized and borderless nature of these assets would make it easy to evade capital control measures during periods of economic downturns. However, this did not imply that the government was opposed to the concept of digital currencies or payments in general.