India has robust digital public infrastructure: Let stablecoins press home that advantage

Finance minister Nirmala Sitharaman and commerce minister Piyush Goyal have reiterated that India will not support cryptocurrencies without sovereign or asset backing. Both leaders have highlighted that the next phase of fintech growth will be driven by AI and blockchain, where innovation advances within clear monetary and regulatory guard-rails.

Together, their remarks frame India’s strategic choice: shape a blockchain-based fintech future through its own digital public infrastructure and regulatory foresight—or risk capital flight and diminished digital sovereignty in an evolving global order.

Stablecoins and a new monetary architecture: Many analysts once viewed stablecoins and blockchain technology as a challenge to banking systems. Yet, the debate has shifted. Stablecoins are now seen as a complement to traditional banking infrastructure—an upgrade that carries liquidity, trust and compliance across borders.

In our article ‘Reduce friction: Let regulated stablecoins transform India’s remittance economy,’ we argued that stablecoins can serve as the “missing layer" in India’s financial stack—bridging the domestic interoperability of the Unified Payments Interface (UPI) with the global flow of remittances.

The Citi Stablecoins 2030 report calls 2025 blockchain’s “ChatGPT moment," with stablecoins driving this transformation and projecting their issuance to reach $1.9 trillion in its base case and $4 trillion in a bullish scenario by 2030. Amid such a landscape, banks will remain cornerstones of trust, liquidity and credit intermediation, while stablecoins modernize the infrastructure that underpins them.

Banks could act as custodians of the reserves that back stablecoins—holding cash or government securities to ensure full convertibility—and issue tokenized deposits, digital representations of existing balances that enable smart contracts, programmable payments and instant settlement.

Far from replacing banks, stablecoins enhance their efficiency, embedding compliance into blockchain code and enabling real-time liquidity. In this architecture, speed and programmability strengthen rather than weaken the banking system.

Global regulatory momentum: Globally, regulators are converging on the same approach: integrating stablecoins within existing banking frameworks, rather than leaving them to unregulated markets. The US’s GENIUS Act of 2025 brings stablecoin issuers under the supervision of the US Treasury and Federal Reserve, requiring full-reserve backing and daily disclosures.

The EU’s Markets in Crypto-Assets Regulation (MiCAR) of 2024 treats ‘e-money tokens’ as supervised payment instruments with reserves held at authorized credit institutions.

Singapore’s Monetary Authority framework of 2023 and Hong Kong’s Monetary Authority regime of 2025 both require one-to-one fiat backing, redemption rights and custody with licensed banks. Japan’s Payment Services Act of 2023 restricts issuance to banks and trusts, while the UAE’s VARA and FSRA rules of 2024 enforce full collateralization and domestic reserve custody.

The policy is clear: Stablecoins succeed when regulated through appropriate authorities, anchoring innovation in trust, transparency and monetary discipline. India’s financial ecosystem already meets many of these conditions—it has the institutions, digital rails and compliance architecture to lead this evolution.

India’s trust layer: The Reserve Bank of India’s (RBI) Interoperable Regulatory Sandbox (IoRS) offers a foundation for the convergence we need. The IoRS enables the testing of innovations in domains under multiple regulators—including those overseeing securities, insurance and international financial centres—under unified oversight.

Within this structure, India can pilot rupee-backed stablecoins issued by licensed financial institutions, backed one-to-one by bank reserves and interoperable with the UPI and digital rupee. The sandbox can embed Know-your-customer, Anti-money-laundering and audit standards directly into digital code, ensuring that innovation unfolds within India’s regulatory bounds.

Beyond RBI, India’s institutional ecosystem is ready for scaled deployment. The National Payments Corp of India (NPCI) can extend its infrastructure to global corridors through stablecoin-linked remittance channels. This would enable instant conversion between fiat money, the digital rupee and rupee-backed stablecoins, thereby embedding compliance at the transaction layer rather than through post-facto audits.

The Financial Intelligence Unit (FIU) could act as the trust layer of this system; it could deploy AI-driven monitoring and blockchain analytics to track flows in real-time. Together, RBI, NPCI and FIU can ensure that India’s stablecoin architecture remains both innovative and secure.

From remittances to a tokenized economy: The potential of stablecoins extends well beyond remittances. They can accelerate India’s shift towards tokenized credit and financial assets. Imagine home loans, MSME financing or trade invoices issued as programmable tokens, where repayments, interest adjustments and lien releases are automated through smart contracts.

Mudra or SIDBI loans could be tokenized to ensure end-use traceability, while carbon credits under the Green Credit Programme could attract verified ESG investment. Such tokenization would digitize compliance, lower transaction costs and create transparent and audit-ready data trails for policymakers and investors.

India’s challenge is not whether to engage with stablecoins, but how to lead their responsible adoption. A restrictive approach could push talent and capital to more agile jurisdictions. A calibrated framework—one that combines RBI’s prudence, NPCI’s interoperability and FIU’s data intelligence—could instead make India the trust capital of digital finance.

Stablecoins are not a threat to the rupee; they are its most scalable expression.

The authors are, respectively, an adjunct professor of data and digital economy, and head, Digital India Foundation (DIF); and senior policy manager, DIF.