India’s RBI Warns: CBDCs Must Replace Stablecoins to Prevent Financial Chaos

Core Viewpoint - The Reserve Bank of India (RBI) warns that the increasing use of privately issued stablecoins poses a threat to financial stability and trust in money, advocating for central bank digital currencies (CBDCs) as a safer alternative to mitigate systemic risks [1][2]. Group 1: Risks of Stablecoins - The RBI identifies stablecoins as a rapidly growing source of risk, particularly during market stress, and urges jurisdictions to assess these risks and develop appropriate policy responses [3]. - The global stablecoin market is projected to reach approximately $300 billion by the end of 2025, with most tokens pegged to the U.S. dollar and dominated by a few issuers [5]. - Stablecoins are closely linked to traditional financial markets, as issuers hold significant amounts of government bonds as reserves, which could lead to amplified volatility during stress scenarios due to sudden redemptions [6]. Group 2: Financial Stability and CBDCs - The RBI emphasizes that CBDCs maintain the integrity of the financial system and serve as the ultimate settlement asset, thereby preserving trust in money [2]. - CBDCs are viewed as a means to facilitate faster payments, programmability, and instant settlement, while ensuring monetary sovereignty and financial stability, unlike stablecoins [7]. - The report highlights that while the global financial conditions appear stable, underlying risks persist due to overstretched asset prices and high levels of debt among the populace [4].