Stablecoins Risk For Policy Sovereignty, Best Avoided: RBI Deputy Governor
With domestic liquidity conditions showing some signs of challenges, Deputy Governor Sankar said the RBI will ensure that there is no scarcity of money for productive purposes.
Reserve Bank of India (RBI) Deputy Governor T Rabi Sankar on Thursday said the stablecoins carry huge risks for "policy sovereignty", and hinted that India will avoid the introduction of the instrument even though it is asset-backed.
With domestic liquidity conditions showing some signs of challenges, Sankar said the RBI will ensure that there is no scarcity of money for productive purposes.
"Economic activity will not suffer because of liquidity reasons," he assured.
"We are very clear in our mind that stablecoins do not serve a purpose that cannot be done better with CBDC (central bank digital currency), and introducing stablecoins would create a lot of policy concerns and issues that are best avoided," Sankar said during an event hosted by Business Standard here.
Admitting that, unlike cryptocurrencies, bitcoin and stablecoins are asset-backed, Sankar elaborated on the risks of the instrument.
"...because they are backed, the value of stablecoins is not something that is in question. But the risks of stable coin to an economy, particularly an emerging economy like India, is that it carries a huge risk of replacing your currency and your policy sovereignty," he added.
Sankar reiterated the central bank's views on cryptocurrencies, making it clear that such 'currencies' do not serve any purpose, and there is no need for such instruments.
On CBDC, he said India will not move fast, and underlined that while over 70 countries in the world have introduced their own CBDCs, everyone is 'hastening slowly'.
In the two years since the introduction of the e-rupee as part of a pilot project, India has witnessed over 10 crore CBDC transactions, Sankar said.
He said the biggest advantages possessed by the CBDC are the promise of making cross-border payments easier and cheaper, and also programmability, which can influence the end use.
On the internationalisation of the rupee, Sankar said it is more of an enabling facility, which will deliver over a longer period of time and underlined that it is in the best interest of Indian trade.
India will not adopt full-scale capital account convertibility in specified steps, but will surely liberalise, he said, pointing to draft measures on external commercial borrowings released on Wednesday.
Going forward, inflows of capital are the first priority for the RBI from a policy measures perspective, he said.
