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RBI warning on stablecoins: Fiat-backed crypto could pose risks to monetary sovereignty, financial stability, says central bank

The RBI has urged other countries to prioritise central bank digital currencies (CBDCs) over privately issued stablecoins to ensure financial stability.

2 min readMumbaiUpdated: Dec 31, 2025 09:58 PM IST

Stablecoins have gained attention in recent years, and their issuance has grown rapidly. Their size, however, remains low relative to wider crypto asset market capitalisation. (Credit: Unsplash)

The Reserve Bank of India (RBI) on Wednesday warned that widespread adoption of stablecoins, or fiat backed cryptocurrencies, could pose significant risks to the country’s monetary sovereignty and financial stability.

The RBI has urged other countries to prioritise central bank digital currencies (CBDCs) over privately issued stablecoins to ensure financial stability.

“The RBI maintains a cautious stance on crypto assets, including stablecoins, prioritising sovereign digital infrastructure to safeguard monetary sovereignty amid global shifts and preserve financial stability,” the RBI said in its Financial Stability Report (FSR).

Stablecoins have gained attention in recent years, and their issuance has grown rapidly. Their size, however, remains low relative to wider crypto asset market capitalisation. Currently, risks from stablecoins to macro financial stability outweigh their purported benefits.

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In their short history, stablecoins have proven to be volatile and vulnerable to confidence shocks and structural fragilities. Wider adoption of stablecoins can introduce new channels of financial stability risks, particularly during periods of market stress, it said.

The RBI stated that the central bank money is what preserves the singleness of money and the integrity of the financial system. It must remain the ultimate settlement asset, and it should remain the anchor for trust in money.

“Central bank digital currencies (CBDCs) can achieve the benefits that stablecoins claim to offer, i.e., efficiency, programmability, and instant settlement, but with the credibility and safety of central bank money,” the RBI said.

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The RBI, therefore, strongly advocates that countries should prioritise CBDCs over privately issued stablecoins to maintain trust in money, preserve financial stability and design next generation payments infrastructure that is faster, cheaper and secure, it said.