The Reserve Bank of India added to its growing argument against cryptocurrencies by citing six specific ways a stablecoin might harm emerging countries.

Source: www.itsec.ru

In its most recent Financial Stability Report, published on June 28, the Reserve Bank of India (RBI) asserted that stablecoins have a great deal of potential to affect emerging markets and developing economies. Six dangers that stablecoins pose were identified in the paper. Although the RBI has consistently criticized cryptocurrencies, it was particularly clear about the issues it sees with stablecoins from an EMDE (Emerging Markets and Developing Economies) perspective. It stated six particular issues, even though: The lack of verified data and associated insufficient information in the crypto ecosystem hinder an accurate evaluation of economic risks.

According to the research, a stablecoin might endanger an EMDE through exchange of currencies because its underlying assets are often valued in readily convertible foreign currency. Currency mismatches might emerge from the ‘cryptoisation’ of the economy that could happen as a result of widespread stablecoin adoption on the financial records of banks, companies, and households.

Because stablecoins are present in the market, an EMDE central bank may have trouble determining the country's interest rate and liquidity situation, according to the RBI. Along with that, crypto-assets' decentralized, unrestricted and anonymous features create extremely attractive tools for bypassing capital flow regulation measures. Stablecoins may hinder banks' capacity to raise capital and extend credit by weakening credit risk assessment by offering an alternative to the national financial system. Peer-to-peer transactions are also difficult to trace, which might raise the likelihood that they would be used for illegal purposes.

Referring to The RBI Executive Director, India Is Looking Into The Offline Capabilities of CBDCs

The RBI used the occasion to reiterate its plea for international cooperation. It stated: "To analyze risks posed to EMDEs relative to AEs [advanced economies], a globally integrated approach is warranted." In this regard, one of the top tasks for stablecoins, DeFi, and unbacked crypto assets would all be subject to international regulation under India's G20 chair.

In terms of central bank digital currency (CBDC), the RBI has been more optimistic. Both a wholesale and an individual digital rupee pilot project were introduced in November and February, respectively. In March, it also agreed to examine a CBDC bridge to ease commerce and remittances with the Central Bank of the United Arab Emirates.

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