Whitepaper On Stablecoins

Whitepaper on Stablecoins¹

Section I – Executive Summary

1.1. At present, India does not have a dedicated regulatory framework for stablecoins. Existing payments, exchange control and anti-money laundering frameworks, such as the Payment and Settlement Systems Act 2007 ("PSS Act"), Foreign Exchange Management Act 1999 ("FEMA"), and Prevention of Money Laundering Act 2002 ("PMLA"), address only portions of the risk spectrum. By contrast, the European Union's Markets in Crypto-Assets Regulation ("MiCA") ² and the United States Guaranteeing Essential Neutral Interoperable Utility Stablecoins ("GENIUS Act,2025")³ have already established comprehensive, disclosure-based regimes that integrate stablecoin issuance into their prudential and consumer-protection architecture.

1.2. In India's context, a calibrated approach would allow licensed institutions to issue or distribute Rupee-referenced tokens fully backed by cash and / or Government of India Treasury bills ("TBills"), with mandatory monthly attestation based on benchmarks similar to those set out in the AICPA 2025 Criteria for Stablecoin Reserves. ⁴ Such a model would (a) enhance efficiency in domestic and cross-border settlements; (b) support export-oriented digital services; and (c) promote internationalisation of the Rupee, all while preserving the Reserve Bank of India's ("RBI") monetary-policy autonomy.

1.3. Globally, stablecoins now account for more than $150 billion in daily transaction value, ⁵ powering programmable-finance use-cases ranging from instant trade-finance settlement to tokenised bond issuance. Their regulated adoption can enable India's Digital Public Infrastructure (DPI), Unified Payments Interface ("UPI"), Aadhaar, Open Network Digital Commerce (ONDC), Open Credit Enablement Network (OCEN), and Account Aggregator infrastructures to interoperate with global Distributed Ledger Technology ("DLT") based networks through trusted, audit-ready payment instruments.

1.4. In this backdrop, it is proposed that the policy for Stablecoins safeguards India's monetary sovereignty, aligns with global regulatory trends, promotes rupee dominance for cross border trade and remittances as well as strengthens financial stability; while simultaneously combating illicit finance, ensuring Anti-Money Laundering ("AML") compliance and protecting consumers.

Section II - Opportunity to Introduce Stablecoins in India

2.1. What is Stablecoin?

2.1.1. Stablecoin is a form of cryptocurrency the value of which is pegged to another asset, including but not limited to fiat currency, gold, etc. to maintain a stable price.

2.1.2. Stablecoins are crucial in the cryptocurrency ecosystem due to their stability which is what make them unique. Cryptocurrencies like Bitcoin and Ether offer numerous benefits, such as not requiring trust in an intermediary institution to send payments anywhere and to anyone. However, their prices are unpredictable and can fluctuate wildly, making them challenging for everyday use.⁶ 2.1.3. Stablecoins aim to tackle these price fluctuations by tying the value of cryptocurrencies to more stable assets, usually fiat currencies. This stability aims to maintain their value over time and encourages their adoption in regular transactions.

2.1.4. Use cases of Stablecoins include:

(a) Cross-border trade and remittances: Reduce costs from ~5% to <1%.

(b) MSME exports: Instant settlement of invoices instead of 3–5-day lags.

(c) Liquidity management: Real-time treasury operations for corporates.

2.1.5. Examples of Stablecoins include the USDC by Circle, which is a Stablecoin pegged 1:1 against the US Dollar. Hence, one USDC is equivalent to one USD.

2.2. Global Context and Regulatory Momentum.

2.2.1. Over the last five years, global financial regulators have converged on the view that fiat-backed stablecoins, when subject to prudential oversight, can coexist safely with existing monetary systems. The MiCA⁷ created the world's first passportable licensing regime for "asset-referenced" and "e-money" tokens, requiring full reserve backing, daily reconciliation, and redemption at par.

2.2.2. The United States, through the GENIUS Act, 2025,⁸ established federal charters for "payment stablecoin institutions", mandating segregation of customer assets, capital buffers, and Office of the Comptroller of the Currency ("OCC") supervised attestations. Singapore's Payment Services (Amendment) Regulations 2023⁹ introduced a Single-Currency-Stablecoin ("SCS") category under the MAS Payment Services Act 2019, that required 100 percent backing by cash and short-term sovereign debt, daily transparency reports, and annual audits. These frameworks collectively demonstrate that regulation, not prohibition, is the sustainable policy response. They also evidence that supervisory confidence increases when stablecoin reserves remain within the domestic banking system.

2.2.3. For India, these global developments provide both precedent and opportunity. The country already possesses a mature payments-law architecture under the PSS Act, a robust foreign-exchange regime under FEMA, and an established AML/CFT framework under PMLA. Similarly, India should also consider a robust regulatory framework for stablecoins.

2.3. Why India Needs a Regulated Stablecoin Framework.

2.3.1. The key benefits for introducing a dedicated regulatory framework for stablecoins would include:

(a) Preserving Monetary Sovereignty and Rupee Dominance: Stablecoins pegged to foreign currencies can undermine RBI's control over money supply and exchange rates, which in turn may lead to capital flight.

(b) Enhancing cross-border trade and remittances: Stablecoins can offer faster and cheaper cross border payments compared to existing traditional remittance framework. A tailored framework, possibly allowing regulated foreign pegged tokens under reciprocity arrangements could reduce remittance costs for millions of Indian expatriates, while preserving RBI's oversight of capital flows and macroprudential controls.

(c) Combating illicit finance and ensuring AML compliance: Anonymous, cross border token transfers can facilitate money laundering, terror financing and tax evasion. Licensing stablecoin issuers as regulated financial institutions would ensure adherence to Know-Your Customer ("KYC"), transaction monitoring, suspicious activity reporting and sanction screening. Further, interoperability requirements with India's existing monitoring agencies such as Financial Intelligence Unit - India ("FIU-IND") would strengthen oversight.

(d) Protecting consumers and investors: Digital-asset issuers are exposed to liquidity, credit and operational risks. A comprehensive regulatory framework can mandate transparency (reserve composition disclosures, proof-of-reserves audits), enforce conduct standards (fair terms, dispute resolution, bankruptcy related provisions) and impose capital and liquidity requirements on issuers. This would reduce fraud, misappropriation and sudden de-pegging (for e.g., TerraUSD) that have pegged global stablecoin issuers.

(e) Strengthening financial stability: Unbacked or weakly collateralized stablecoins pose run and contagion risk.

(f) Integrating with a Digital Rupee Strategy: As India designs its Central Bank Digital Currency ("CBDC" or "e₹") framework, a complimentary stablecoin regime would delineate roles; CBDC for monetary policy implementation and fiscal disbursements; and stablecoins for commercial payments. Such clarity would prevent overlap, encourage interoperability and leverage private innovation.

(g) Aligning with Global Regulatory Trends: Major jurisdictions including the United States (US), European Union (EU), and Singapore have already introduced tailored stablecoin frameworks. An Indian framework aligned with international best practices would facilitate cross-jurisdictional coordination, mutual recognition and regulatory universality, ensuring Indian issuers have access to global markers under trusted regimes.

(h) Fostering innovation and payment system modernization: A balanced, risk-based framework can encourage fintech innovation by providing legal certainty to issuers, service providers, and integrators. By permitting licensed stablecoins, India could accelerate digital payments, programmable escrow, and micro-remittance use cases. Regulatory certainty would attract investments and talent to the domestic digital-asset ecosystem.

2.3.2. India's digital-payments ecosystem, led by UPI, Immediate Payment Services (IMPS), and Aadhaar Enabled Payment System (AePS), processes billions of transactions monthly. Yet international settlements and B2B transfers remain slow and costly due to reliance on SWIFT correspondent banking, pre-funded nostro/vostro accounts, and FX-conversion frictions. Stablecoins can eliminate these inefficiencies by enabling atomic settlement that is simultaneous exchange of value and information.

2.3.3. A domestic, rupee-pegged stablecoin would act as a programmable digital cash equivalent, circulating only within the regulated financial perimeter. When issued by licensed entities, it would function as a regulated instrument, with each token representing a claim on underlying fiat reserves held with scheduled commercial banks.

2.3.4. In addition, cross-border MSME exporters suffer liquidity delays awaiting remittances; stablecoinbased rails could compress this to minutes.

2.3.5. Most importantly, a well-regulated stablecoin system would reduce systemic concentration risk by decentralising settlement infrastructure, making India's payment networks more resilient to cyber and operational outages, a growing concern noted in the RBI's 2024 Financial Stability Report.10

2.3.6. Therefore, India's objective should not be to replace the CBDC but to complement it. The e₹ can serve retail cash-replacement use cases, while stablecoins address programmable, cross-border, and institutional needs.

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Originally published on 10 November, 2025

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