{"id":69348,"date":"2025-10-17T11:36:06","date_gmt":"2025-10-17T06:06:06","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=69348"},"modified":"2025-10-17T11:36:06","modified_gmt":"2025-10-17T06:06:06","slug":"rbi-governor-advocates-cbdcs-over-stablecoins-for-safer-global-payments","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/rbi-governor-advocates-cbdcs-over-stablecoins-for-safer-global-payments\/","title":{"rendered":"RBI Governor Advocates CBDCs Over Stablecoins for Safer Global Payments"},"content":{"rendered":"<h2><b>CBDC vs Stablecoin Latest News<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">RBI Governor Sanjay Malhotra urged global central banks to adopt and promote <\/span><b>Central Bank Digital Currencies (CBDCs)<\/b><span style=\"font-weight: 400;\"> over <\/span><b>stablecoins<\/b><span style=\"font-weight: 400;\"> for cross-border payments.\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Speaking at the World Bank\u2013IMF annual meeting in Washington, DC, he reiterated <\/span><b>India\u2019s caution on cryptocurrencies<\/b><span style=\"font-weight: 400;\">, citing risks to monetary policy, capital flows, and financial integrity, including money laundering concerns.<\/span><\/li>\n<\/ul>\n<h2><b>Stablecoins<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Stablecoins are a type of cryptocurrency designed to maintain a stable value by <\/span><b>being pegged to a reserve asset<\/b><span style=\"font-weight: 400;\"> such as a fiat currency (like the US dollar), a commodity (like gold), or a basket of assets.<\/span><\/li>\n<\/ul>\n<h3><b>Key Features<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Aim to reduce price volatility common in cryptocurrencies like Bitcoin or Ethereum.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Backed by collateral reserves, algorithms, or a combination of both.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Enable faster and cheaper transactions across borders compared to traditional banking systems.<\/span><\/li>\n<\/ul>\n<h3><b>Types of Stablecoins<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Fiat-backed Stablecoins<\/b><span style=\"font-weight: 400;\">: Backed by reserves of fiat currency (e.g., Tether (USDT), USD Coin (USDC)).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Crypto-backed Stablecoins<\/b><span style=\"font-weight: 400;\">: Collateralised by other cryptocurrencies (e.g., DAI).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Algorithmic Stablecoins<\/b><span style=\"font-weight: 400;\">: Maintain value through algorithms that control supply and demand (e.g., UST \u2013 now defunct).<\/span><\/li>\n<\/ul>\n<h3><b>Risks and Concerns<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Regulatory uncertainty and lack of global standards.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Reserve transparency and liquidity risks if not fully backed.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Potential for financial instability and \u201cdollarisation\u201d in developing countries.<\/span><\/li>\n<\/ul>\n<h2><b>Central Bank Digital Currency (CBDC)<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">CBDC is the legal tender issued by a central bank in a digital form.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">E.g., CBDC of India is the <\/span><b>digital form of the Indian rupee<\/b><span style=\"font-weight: 400;\">, issued and regulated by the <\/span><b>Reserve Bank of India (RBI)<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">It represents <\/span><b>sovereign currency<\/b><span style=\"font-weight: 400;\"> in an electronic form and is backed by the full faith and credit of the government, just like physical cash.<\/span><\/li>\n<\/ul>\n<h3><b>Types of CBDC in India<\/b><\/h3>\n<ul>\n<li aria-level=\"1\"><b>Retail CBDC (e\u20b9-R)<\/b>\n<ul>\n<li aria-level=\"1\"><span style=\"font-weight: 400;\">Meant for use by the public, including individuals and businesses.<\/span><\/li>\n<li aria-level=\"1\"><span style=\"font-weight: 400;\">Functions as a digital alternative to cash for everyday transactions.<\/span><\/li>\n<li aria-level=\"1\"><span style=\"font-weight: 400;\">Pilot launched in December 2022 in select cities.<\/span><\/li>\n<\/ul>\n<\/li>\n<li aria-level=\"1\"><b>Wholesale CBDC (e\u20b9-W)<\/b>\n<ul>\n<li aria-level=\"1\"><span style=\"font-weight: 400;\">Designed for financial institutions to settle interbank transfers and securities transactions efficiently.<\/span><\/li>\n<li aria-level=\"1\"><span style=\"font-weight: 400;\">Aims to improve the speed, transparency, and cost-effectiveness of large-value payments.<\/span><\/li>\n<li aria-level=\"1\"><span style=\"font-weight: 400;\">Pilot project to use digital rupee in the wholesale market for secondary trade in government securities (G-secs) was launched in November 2022.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3><b>Objectives<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">To reduce dependence on physical cash and printing costs.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">To enhance payment efficiency and financial inclusion.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">To support cross-border payments and improve monetary policy transmission.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">To provide a secure, sovereign alternative to private cryptocurrencies and stablecoins.<\/span><\/li>\n<\/ul>\n<h2><b>Promoting CBDCs\u00a0<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Speaking at the IMF\u2013World Bank annual meeting, RBI Governor urged central banks worldwide to promote Central Bank Digital Currencies (CBDCs) over stablecoins to facilitate international payments.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">He argued that CBDCs, being <\/span><b>fiat-backed and tokenisable<\/b><span style=\"font-weight: 400;\">, offer the benefits of stability, monetary integrity, and the singleness of money \u2014 advantages that private stablecoins cannot ensure.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">He emphasised that global adoption was crucial for realising CBDCs\u2019 full potential in cross-border transactions and urged coordinated promotion among central banks.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">The RBI is currently conducting <\/span><b>pilot projects for both retail and wholesale CBDCs<\/b><span style=\"font-weight: 400;\">, focusing on their potential to ease cross-border settlements, as domestic payment systems in India are already efficient.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">RBI Governor reiterated India\u2019s <\/span><b>longstanding caution on cryptocurrencies<\/b><span style=\"font-weight: 400;\">, warning that their use could affect <\/span><b>monetary policy, capital flows, and financial integrity<\/b><span style=\"font-weight: 400;\">, particularly through <\/span><b>money laundering risks<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<h2><b>Shift in Government\u2019s Tone on Stablecoins<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">RBI Governor\u2019s remarks come soon after Finance Minister Nirmala Sitharaman indicated a more open stance toward stablecoins.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Recently, she said <\/span><b>stablecoins and similar innovations were transforming global finance<\/b><span style=\"font-weight: 400;\"> and forcing nations to adapt or risk exclusion from evolving monetary systems.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">She noted that while countries may differ in response, none could insulate themselves from systemic change in global finance.<\/span><\/li>\n<\/ul>\n<h3><b>Rising Global Acceptance of Stablecoins<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Across major economies, stablecoins \u2014 private digital currencies pegged to fiat currencies like the US dollar \u2014 are gaining regulatory acceptance:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">In June 2025, the US Senate passed the GENIUS Act to regulate stablecoins.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">South Korea\u2019s National Assembly introduced the Digital Asset Basic Act, allowing firms to issue won-backed stablecoins.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Hong Kong passed a stablecoin licensing law in May 2025 for local issuers.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Governments see such frameworks as ways to strengthen their currencies\u2019 global roles.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">US govt argued that stablecoins could boost demand for US Treasuries, lower borrowing costs, and reinforce dollar dominance.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Currently, Tether and USDC, both pegged to the US dollar, command 90% of the $285 billion global stablecoin market.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3><b>RBI\u2019s Concerns<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The RBI has consistently warned that widespread use of US dollar-backed stablecoins could lead to the dollarisation of India\u2019s economy, reducing the rupee\u2019s role in domestic transactions.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Such a shift could weaken India\u2019s monetary sovereignty, as the RBI and government would lose control over the supply and circulation of the US dollar in domestic markets.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b> <strong><a href=\"https:\/\/indianexpress.com\/article\/business\/rbi-governor-malhotra-urges-central-banks-promote-cbdcs-stablecoins-10309697\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a> | <a href=\"https:\/\/www.rbi.org.in\/commonman\/English\/scripts\/FAQs.aspx?Id=3686\" target=\"_blank\" rel=\"nofollow noopener\">RBI<\/a> | <a href=\"https:\/\/www.cnbctv18.com\/economy\/rbi-governor-backs-cbdc-over-cryptocurrencies-cites-policy-and-capital-control-risks-19717630.htm\" target=\"_blank\" rel=\"nofollow noopener\">CNBC<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>RBI Governor Sanjay Malhotra urges central banks to adopt CBDCs over stablecoins for cross-border payments, citing monetary stability and risks from private crypto assets.<\/p>\n","protected":false},"author":18,"featured_media":69358,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[3294,60,22,59],"class_list":{"0":"post-69348","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-cbdc-vs-stablecoin","9":"tag-mains-articles","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/69348","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=69348"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/69348\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/69358"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=69348"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=69348"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=69348"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}