India saw the escalation of the cryptocurrency draft bill in the winter session of Parliament. However, it could not reach any conclusion as the bill was shelved from the last hearing. Nevertheless, the central bank of India was raising new concerns about crypto and also stablecoins.
As per reports, the Reserve Bank of India shifted focus from Bitcoin and called out stablecoins. The concern of the apex bank was with stablecoins being pegged to the US dollar or other foreign national currencies as they could undermine the Indian Rupee.
Often the value of stablecoins is tied to underlying assets like the USD or even gold. As per RBI’s worry, companies or traders could move to stablecoins for domestic payments. This could affect the central bank’s ability to control currency fluctuations and volatility.
Adding to this worry, the RBI stated that many exchanges were doling out interest rates between 10% and 12% on stablecoin deposits. this was seen similar to fixed deposits by the bank.
Amit Maheshwari, tax partner at tax consulting firm AKM Global reportedly stated,
“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 stablecoin could pose is that it if people in India start using USD backed stable coins as a mode of payment, partial or full, it can undermine the value of the Indian currency and the RBI will not have any control over this.”
While RBI remained worrisome, the Indian government has not taken any decision on the status of cryptocurrencies. Nevertheless, the RBI is proposing the idea of central bank digital currency [CBDC] to the government as an effective currency instead of allowing crypto to be a legal tender.
The country was already working on a CBDC but cryptos and stablecoins may have to wait longer.