The Reserve Bank of India (RBI) has raised concerns over the potential negative impacts of widespread crypto asset usage, including stablecoins, on macroeconomic and financial stability, according to its latest Financial Stability Report (FSR).
The central bank noted that excessive adoption of crypto assets could undermine monetary policy, heighten fiscal risks, bypass capital flow management measures, divert resources from the real economy, and threaten global financial stability. Stablecoins, despite their pegging to reserve assets, were highlighted as carrying “run risks.”
The RBI warned of the growing interconnectedness between crypto markets and the traditional financial system. Citing the International Monetary Fund and Financial Stability Board’s synthesis paper, the RBI emphaised that while the crypto market remains relatively small, its expansion could pose systemic risks.
This caution comes as virtual digital assets (VDAs), including bitcoin, experienced a surge in 2024. Bitcoin’s price crossed the $100,000 mark earlier this month, reaching a record $108,316 shortly after, doubling its value this year. The rise has significantly boosted the market capitalization of stablecoins, which facilitate lending, borrowing, and trading of digital assets.
DLT-based tokenisation
The RBI also expressed concerns about distributed ledger technology (DLT)-based tokenisation. While still in its nascent stage, tokenisation—representing real-world assets like government securities via digital tokens—could increase interconnectedness between traditional financial systems and decentralised finance (DeFi). This interconnectedness, the report said, could expose vulnerabilities such as liquidity mismatches, leverage, and operational risks.
India’s growing crypto ecosystem, featuring players like CoinDCX and CoinSwitch with user bases of 16 million and 20 million respectively, adds concern. The RBI remains cautious as the sector expands, reiterating the importance of robust regulation to mitigate risks and ensure financial stability.
