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The anonymous founders of Bitcoin, the world’s largest cryptocurrency by market capitalisation, intended to substitute the centralised model of money with decentralised cryptography. However, the volatility of crypto assets makes them ineffective as a medium of exchange and astable store of value — roles that money is expected to play. Consequently, crypto assets have transitioned into a separate investment class.
To address volatility, private entities launched stablecoins around 2015. Tether and USD Coin are the two largest stablecoins in the cryptocurrency market. They are pegged to the US dollar with promised 1:1 convertibility. This makes them a reliable tool for cryptocurrency traders to store value without the volatility of other digital assets like Bitcoin or Ethereum. Tether is operated by Tether Limited, while USD Coin is managed by a consortium called Centre, which includes Circle and Coinbase.
The future of digital currency in India is a contest between unregulated private stablecoins and RBI’s central bank digital currency, both vying for public trust.
By some estimates, there are 314 million stablecoin holders in India — the most in the world. The number indicates that stablecoins offer significant benefits over conventional digital payments in niche categories. Being pegged to the dollar, stablecoins are universally accepted and make a compelling use-case for cross-border remittances. Stablecoin remittances are instantaneous and much cheaper compared to the traditional remittance route offered by Indian banks.
After the US passed the GENIUS Act (2025) to provide a legal and regulatory framework for stablecoins, it helped build trust in private currencies. However, significant risks remain for users in India. A private currency may become worthless if its issuer fails or it loses its peg to the fiat currency. TerraUSD is a case in point. It was part of the Terra blockchain ecosystem created by Terraform Labs and pegged to the US dollar through an algorithmic mechanism tied to another token called LUNA. In 2022, TerraUSD began trading below the 1:1 peg and eventually imploded, with investors losing USD 60 billion.
As India hasn’t taken steps to regulate usage, stablecoins operate outside a legal framework and without any meaningful customer protection. The Reserve Bank of India (RBI) has taken steps to issue its digital currency. In 2022, RBI published a concept note on Central Bank Digital Currency (CBDC) and is running pilots before making it accessible to the public at large. CBDC is equivalent to a banknote and legal tender backed by sovereign guarantee but its form factor is digital.
The hyper growth in digital payments in recent times is fuelled by bank deposits. CBDC, issued by the RBI, on the other hand shall be the most trusted form of digital currency available to Indians. According to the concept note, it will also safeguard public interest from the proliferation of cryptocurrencies by providing a compelling choice for Indians to use programmable digital currency. While RBI has made it clear CBDC is not meant to bypass transactions processed by commercial banks or disrupt the country’s vibrant digital payment ecosystem, it remains to be seen what specific use cases it will be a solution for.
For stablecoins to gain trust and currency (pun intended) among users, they will have to build a strong foundation of trust. That will be a tall task without the Indian government legitimising them and creating a legal framework for their use. Irrespective of how things play out for stablecoins in terms of the government accepting their use, it is evident that without customer trust they will just be code and not currency.
This article first appeared in the Business Standard on 21 September 2025.
