RBI Governor Advocates CBDCs Over Stablecoins
In a significant move for the global financial landscape, RBI Governor Sanjay Malhotra has called on other central banks to prioritize Central Bank Digital Currencies (CBDCs) over stablecoins for international payments. During an annual meeting of the World Bank Group and the International Monetary Fund (IMF) in Washington, he highlighted the advantages of CBDCs, stating that they can enhance cross-border transactions.
Malhotra explained that CBDCs are fiat currencies with benefits that stablecoins cannot offer. He emphasized their integrity, tokenization capabilities, and the importance of unified money systems. The Governor urged other countries to adopt CBDCs to fully realize their potential in facilitating international payments.
Currently, the Reserve Bank of India is testing two types of CBDCs: retail and wholesale. Malhotra noted that while domestic payments in India are stable, the future of cross-border payments lies in the successful implementation of CBDCs. His comments come at a time of evolving government perspectives on stablecoins, as Finance Minister Nirmala Sitharaman recently suggested that innovations like stablecoins are reshaping the financial landscape.
Sitharaman’s remarks coincide with a growing acceptance of stablecoins globally. Legislative efforts in countries such as the United States, South Korea, and Hong Kong indicate a shift toward integrating stablecoins into financial systems. In this context, Malhotra cautioned about the risks posed by dollar-linked private cryptocurrencies, which could lead to the dollarization of the Indian economy, undermining the effectiveness of domestic monetary policy.
On the economic front, Malhotra praised India’s impressive growth, stating it has been “phenomenal.” With a GDP growth forecast of 6.8% for the current fiscal year, he acknowledged potential upside if trade negotiations with the US resolve positively. The RBI has also adjusted its growth predictions in light of recent economic performance, indicating strong resilience despite external pressures such as tariffs on Indian goods.
In summary, Malhotra’s advocacy for CBDCs represents a strategic vision for India's monetary future, emphasizing the need for a cohesive global approach to digital currencies. The integration of CBDCs could ensure that countries, especially India, remain competitive in an evolving financial landscape.
