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Picture Courtesy: Indian Express

Context:

At the annual meeting of the World Bank Group and the International Monetary Fund (IMF) in Washington, DC, Reserve Bank of India (RBI) Governor Sanjay Malhotra called on central banks worldwide to adopt and promote Central Bank Digital Currencies (CBDCs) instead of stablecoins for facilitating cross-border transactions. 

What are CBDC and Stablecoins?

A CBDC is a digital version of a country’s official currency, issued and regulated by its central bank (like the Reserve Bank of India). It is legal tender, meaning it has the same value and backing as paper currency or coins.

Stablecoins are a type of cryptocurrency whose value is pegged to a stable asset, like a fiat currency (e.g., US dollar) or a commodity (like gold), to reduce volatility.

Evolution of CBDCs and Stablecoins (Global and Indian Context):

Current status of CBDC and Stablecoins:

CBDC:

• The e-Rupee (Retail CBDC) in India has seen a ten-fold increase in circulation over about 15 months: from ₹103 crore in December 2023 to ₹1,016 crore by March 2025. (Source: Fortune India)
• It’s now in use via 17 banks and has about 60 lakh users participating in the pilot for the retail version. (Source: Fortune India)
• India has launched a retail sandbox as of October 2025 so fintechs can build/test applications using the e-Rupee. Approx. 7 million users are using the CBDC ecosystem now. (Source: Reuters) 

Stablecoins:

• The global stablecoin market has crossed US$250-300 billion in market capitalization as of late 2025. (Source: Outpost) 

• The largest players are USDT (Tether) and USDC (Circle’s USD Coin). Together, they hold a large majority of the market (often 80-90%) depending on the report. (Source: MEXC) 

• Forecasts suggest the stablecoin market could continue to grow rapidly — estimates range to reach US$1-2 trillion by 2028 or 2030. (Source: Mobee) 

Linkages Between CBDCs and Stablecoins:

• Both CBDCs and stablecoins aim to make money more efficient, digital, and accessible. Example: The RBI’s Digital Rupee (CBDC) and USDC stablecoin both allow instant digital transactions but differ in issuer and legal backing. 

• CBDCs and stablecoins compete for users in the digital payments space. However, they can also complement each other — CBDCs can serve as trusted settlement layers, while stablecoins can innovate on top (e.g., DeFi, programmable payments). The European Central Bank envisions co-existence — stablecoins could run on CBDC-backed infrastructure for safety and regulation.
  (Source: ECB Discussion Paper on Digital Euro, 2024) 

• Stablecoins have already been used for international transactions due to their 24/7 availability and low cost. CBDCs, if interoperable across countries, could achieve similar benefits without the volatility or regulatory uncertainty of stablecoins. According to the Atlantic Council (2025), over 135 countries are exploring CBDCs, many focusing on cross-border payment linkages to counter the growing use of dollar-backed stablecoins. 

• Widespread use of USD-pegged stablecoins (like Tether or USDC) can lead to dollarisation in emerging economies, weakening domestic monetary control. CBDCs are being developed as a sovereign alternative to prevent this dependency. The RBI Governor (2025) warned that stablecoins could undermine India’s monetary autonomy, urging global CBDC promotion instead. (Source: The Indian Express, Oct 2025) 

Challenges of CBDCs:

• A CBDC system often records every transaction centrally, which may lead to concerns about government surveillance. 

• Digital currencies are targets for cyberattacks, DDoS attacks, or infrastructure failures.  

• If people store large amounts of money directly in CBDC wallets instead of commercial banks, banks could lose deposit base, reducing their ability to lend. 

• In India, the e-rupee has had only modest uptake in some cases; user awareness, digital literacy, and trust are still low.  

• CBDCs could change how money supply is controlled, possibly making conventional tools (like interest rates, bank reserve requirements) less effective.

Challenges of Stablecoins:

• Rules around stablecoins vary widely across countries. Some countries are developing legislation; others have none. 

• When stablecoins pegged to a foreign currency (e.g. USD) become widely used in another country, they can reduce that country’s ability to control its own monetary policy.  

• Stablecoins need sufficient reserves and good collateral management; if not, they risk losing their peg. 

• Stablecoins, as they grow and link more with traditional finance, could interfere with how central banks manage inflation, interest rates and capital flows. 

Government Measures for CBDC and Stablecoins:

• CBDC Launch (Digital Rupee): RBI launched Digital Rupee pilots for wholesale (2022) and retail (2023) use to promote digital payments and reduce cash dependency. (Source: RBI Annual Report 2024) 

• Legal and Regulatory Framework: RBI regulates CBDC under the RBI Act, 1934. Stablecoins not yet legal — RBI and Finance Ministry have warned against private crypto-backed stablecoins.  

• Technology and Infrastructure: Use of Distributed Ledger Technology (DLT) and token-based systems for secure transactions. 

• Financial Inclusion Focus: Integration of CBDC with UPI and digital wallets under the Digital India  

• Global Coordination: India participates in G20 discussions on crypto and CBDC regulation to ensure international interoperability and financial stability. (Source: RBI Concept Note on CBDC (2022); Economic Survey (2024–25); Ministry of Finance Reports (2025). 

Way Forward for CBDC and Stablecoins:

• Global Interoperability: India should collaborate with other nations for cross-border CBDC frameworks; BIS reports show only 4% of CBDCs are interoperable globally (Source: BIS 2024). 

• Robust Regulation: Establish a legal framework for stablecoins to prevent misuse while enabling innovation — aligning with G20 Crypto Asset Roadmap (2024). 

• Public Awareness & Inclusion: Promote financial literacy for CBDC adoption; currently, less than 10% of Indian users have used CBDC pilot apps (Source: RBI Pilot Data 2025). 

• Technology Security: Invest in cybersecurity and blockchain resilience as cyberattacks on digital currencies rose 35% globally in 2024 (Source: IMF Digital Finance Report). 

• Balanced Coexistence: Encourage a coexistence model where CBDCs serve as legal tender while stablecoins are regulated as digital assets. 

Source: Indian Express