India’s central bank urges countries to favor CBDCs over stablecoins for safer digital payments

Reserve Bank of India (RBI) has called on governments worldwide to prioritize central bank digital currencies (CBDCs) over privately issued stablecoins, arguing that CBDCs can deliver the same financial benefits as stablecoins — including speed, efficiency, and programmability — without destabalising the whole financial structure of the country.

In its December 2025 Financial Stability Report, the RBI called CBDCs the “ultimate settlement asset” that preserves the singleness of money and anchoring trust in national payment systems. According to the central bank, digital currencies issued by sovereign authorities can modernize payments infrastructure while ensuring that central banks remain at the core of monetary systems.

The RBI argued that CBDCs offer the same advantages often associated with stablecoins, such as instant settlement and programmability, but with the added credibility and safety of central bank backing. This distinction, the bank said, is critical at a time when digital payments are expanding rapidly and private issuers are playing an increasingly prominent role in financial infrastructure.

While India’s government has indicated through its Economic Survey 2025–2026 that stablecoin remains one of the their considerations, but it has still called for caution when it comes to stablecoins.

Why the RBI sees stablecoins as a systemic risk

The central bank also warned that the mass adoption of private stablecoins could create new channels of financial instability, particularly during periods of market stress. RBI claims that stablecoins are vulnerable to sudden redemption runs if confidence in an issuer falters, potentially triggering liquidity crisis that spills over into the broader financial system.

De-pegging events, where a stablecoin fails to maintain its intended value, were also highlighted as a risk capable of undermining trust and amplifying market volatility. The RBI further cautioned that relying on privately issued digital money could weaken monetary sovereignty by shifting critical financial infrastructure into the hands of commercial entities.

For these reasons, it urged jurisdictions to carefully assess the risks associated with stablecoins and develop appropriate policy responses before allowing them to scale within domestic financial systems.

These concerns come as stablecoin adoption continues to accelerate globally. According to DefiLlama data, the market capitalization of stablecoins grew from approximately $205 billion to $307 billion in 2025, driven by demand for faster and cheaper cross-border payments.

Despite the RBI’s confidence in CBDCs, critics remain wary of their broader implications. Privacy advocates have raised concerns that CBDCs could allow central banks to monitor transactions more closely than traditional financial systems, potentially enabling excessive surveillance.

Others argue that allowing individuals to hold digital currency directly with central banks could disrupt commercial banking by drawing deposits away from private institutions.

There are also concerns that CBDCs could lead to an over-centralization of financial power, concentrating control over money within government authorities and reducing financial autonomy. These criticisms have contributed to a cautious global rollout of CBDCs, despite growing interest among policymakers.

According to the Atlantic Council’s CBDC tracker, only three jurisdictions — Nigeria, the Bahamas, and Jamaica — have fully launched CBDCs to date. Dozens of other countries remain in pilot, development, or research phases. India’s own e-rupee initiative is still being tested, with the RBI signaling that a measured rollout is essential to addressing technical, regulatory, and social concerns.

Weighing stability against privacy concerns

From a broader perspective, the RBI’s argument carries weight when viewed through the lens of financial stability. CBDCs appear capable of replicating many of the efficiencies offered by stablecoins while reducing the risk of destabilizing events such as redemption runs or issuer failures. In that sense, central-bank-issued digital money may offer a more resilient foundation for large-scale digital payments.

At the same time, concerns around privacy and centralization cannot be dismissed. A CBDC framework that lacks strong safeguards could undermine public trust, particularly if users fear excessive oversight of their financial activity. The effectiveness of CBDCs may ultimately depend on whether central banks can design systems that balance transparency and security with meaningful privacy protections.

Taken together, the debate highlights a fundamental trade-off between innovation and control. While stablecoins have demonstrated clear utility, the systemic risks identified by the RBI are difficult to ignore. CBDCs, if carefully designed, may be able to deliver similar benefits without exposing financial systems to the same vulnerabilities — but only if concerns around privacy and governance are addressed alongside technological progress.