RBI Rejects G7/GENIUS Act Model: Prioritizing Monetary Sovereignty Over Stablecoins
The Reserve Bank of India (RBI) has strongly asserted that its approach to digital currency regulation, particularly concerning stablecoins, cannot and will not mirror frameworks like the U.S. "GENIUS Act" or other G7-led models. This position, articulated by Deputy Governor T. Rabi Sankar, reflects a fundamental philosophical and practical divergence from Western regulatory trends. The RBI views stablecoins, particularly those pegged to foreign fiat currencies like the US Dollar (USD), as an inherent threat to India’s monetary sovereignty and financial stability.
Fundamental Differences in Policy Stance
The core argument of the RBI is that stablecoins, despite their stable value proposition, are structurally incompatible with India's domestic financial imperatives and pose risks that outweigh any purported benefits. The RBI views stablecoins as "Private Money, Inherently Unstable," lacking the core attributes of modern money, which poses major macro-financial risks, whereas frameworks like the GENIUS Act treat them as a Regulated Payment Instrument, establishing them as a part of the formal payment system. Regarding the primary digital alternative, the RBI champions the Central Bank Digital Currency (CBDC), the e-Rupee, as the superior, risk-free alternative that offers the technological advantages of blockchain while maintaining full central bank control. Conversely, the GENIUS Act permits private issuers, creating strict federal and state licensing pathways for regulated non-bank entities and banks to issue USD-backed stablecoins. Concerning the need for stablecoins in payments, the RBI states there is None, pointing to India's already highly efficient digital payment infrastructures (UPI, RTGS, NEFT) which provide fast, low-cost, and secure payments at scale, negating the need for private digital tokens. In Western markets, however, stablecoins are seen as having High Utility for facilitating faster and cheaper cross-border payments, corporate treasury management, and providing USD access in emerging markets. Finally, the RBI identifies the primary risk as Monetary Sovereignty, specifically the threat of currency substitution and dollarization (or foreign fiat pegging), which would weaken monetary policy transmission and capital flow management. The GENIUS Act's primary focus is Reserve Solvency, requiring 1:1 backing with high-quality, liquid reserves (cash, short-term Treasuries) and strong disclosure for consumer protection and systemic risk management.
The Threat of "Dollarization" and Seigniorage
Deputy Governor Sankar explicitly warned that the threat from stablecoins is "greater when a stablecoin works well." A widely adopted USD-pegged stablecoin could erode demand for the local currency (INR), making the Indian economy reliant on foreign monetary policy. This also results in a loss of seigniorage income (sovereign revenue from printing money) to private, often foreign-based, stablecoin issuers. While the Indian Finance Minister has indicated the government may consider a stablecoin framework in its upcoming Economic Survey, the RBI remains firm that any framework must be guided by domestic priorities and a preference for the sovereign-backed digital rupee (CBDC) over private tokens. The Digital Rupee (e₹) is currently being tested in pilot projects for both retail (e₹-R) and wholesale (e₹-W) segments, with the retail pilot, launched in December 2022, involving 19 banks and focusing on features like offline capability and programmability to integrate seamlessly into India's existing digital payments landscape.