Stablecoins are an existential threat to policy sovereignty and are only useful to a few countries, said Reserve Bank of India Deputy Governor Rabi Sankar at an event, according to the local news platform The Hindu.
Given the concerns around stablecoins, central bank digital currencies (CBDC) are better "stable solutions" for every country, Sankar said.
The number two at the Indian central bank said that stablecoins are beneficial to economies such as the U.S. and Europe, to whose currencies the stablecoins may be linked. But in a country like India, they could potentially replace the use of the rupee in the local economy, Sankar said, thanks also in part to the transfer of profits made by the government by issuing currency to private players.
"If large stablecoins are linked to some other currency, there is a risk of dollarization," Sankar reportedly said, expressing concerns about the potential impact of stablecoins on India’s capital regulations or monetary policy. "We have to be very careful about allowing these sorts of instruments... From the past experience in other countries, it is an existential threat to policy sovereignty."
CoinDesk previously reported that emerging economies represented in the Group of 20 (G20) forum have major concerns around stablecoins. Global stablecoin regulation has become a sticking point between the Group of Seven, representing advanced economies and the G20, representing emerging and advanced economies.
Sankar's comments confirm concerns within the G20, of which India currently holds the presidency. The G7 has said its nations will align with the Financial Stability Board's (FSB) recommendations for stablecoins, expected this month, which are focused on the impact of stablecoin use on wider financial stability. Meanwhile, the G20 is looking to align with a more nuanced synthesis paper jointly produced by the International Monetary Fund (IMF) and the FSB expected later in the year.
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