India’s central bank raises concerns about stablecoins’ effects on the Indian rupee

India saw all kinds of FUD over the past month, as plans to ban private cryptocurrencies were speculated upon. Even as the parliamentary discussion on the proposed cryptocurrency bill has reportedly been put on hold, the country’s central bank has continued its crusade against the digital asset industry.

The Reserve Bank of India recently raised fresh concerns regarding the crypto space. Well, this time aiming its skepticism toward stablecoins. The Central Bank is of the belief that stablecoins pegged to the U.S. Dollar or other foreign national currencies could undermine the Indian Rupee, according to the reports by local media.

Reportedly, these concerns have also been expressed to the government over the course of several meetings. RBI’s main concern is the usage of stablecoins by companies or traders in the near future. Even for domestic payments where the Rupee would otherwise have been used.

Further, the central bank has also noted that increased usage and acceptance of stablecoins in the country could even impede the RBI’s ability to control currency fluctuations and volatility. Further, the local media also highlighted RBI’s concerns over exchanges providing high-interest rates on stablecoin deposits. They were as high as 10%-12% which is more than those for fixed deposits, further enticing investors.

Interestingly, the Indian government is in talks with stakeholders about whether cryptocurrencies should be banned or regulated by the RBI. These digital assets are considered to be a “systematic risk” to the national economy by many.

Furthermore, the RBI has vehemently opposed Bitcoin for years now, even unsuccessfully banning them completely at one point in 2018. The central bank is instead pushing the idea of an Indian CBDC, as it is viewed as an effective answer to the pitfalls of private cryptocurrencies.

The bank also sent a proposal to the government recently, to widen the scope of ‘bank note’ to include the CBDC. It is worth noting that the development of the CBDC is currently underway in India.