The Reserve Bank of India (RBI) deputy governor T Rabi Sankar reportedly expressed his notion about stablecoins saying that the threats created by Stablecoins are the factor behind the need for central bank digital currency (CBDC).
While speaking at a webinar on CBDC organised by ICRIER, Sankar said “Stablecoins are a much bigger threat in terms of dollarisation than in terms of crypto being used for small value or other transactions. Tesla initially said it would accept crypto but withdrew. One of the reasons is extreme volatility.”
Dollarisation refers to the domination of the US currency in the internal economy of a country.
RBI for long had been unsure of central bank digital currency (CBDC), but it seems that their notion has changed with the emergence of stablecoins.
Sankar said that earlier the notion was that CBDC could not achieve anything more than what digital money could. Nevertheless, now the concern is how to go about implementing digital currency.
The deputy governor touched upon what he called the most significant advantage of CBDC is its role in financial payments.
He, however, believes that the current model of correspondent banking leaves room for improvement in cost and time efficiency.
Later, Sankar emphasized how it is essential that CBDCs are widely available across countries and there must be communication amongst CBDCs. But one still has to wait to see how this happens and if it is through bilateral arrangements.
He said that rupee and dollar transactions can now take place in the middle of the night, thanks to digital currencies. By chance, most of the correspondent banks happen to be Western multinationals that play a major role in implementing sanctions.
The issue of volatility thus became quite evident with the emergence of stablecoins and now central banks believe there is a clear threat from private currencies. Things would be worse if multiple private currencies ousted the official or fiat currency. This concern is what has led to about of activities across central banks as per Sankar.
Well, Sankar’s latest views on Stablecoins are rather an extension of his apprehensive views on Crypto if not exactly a reiteration. In February too, Sankar had called for an outright ban on crypto in the country, likening them to ‘Ponzi schemes’.
