Asia Races Ahead as India Stalls on Stablecoin Rules

India Confronts Stablecoin Shifts as Finance Minister Outlines Global Challenges

India's stablecoin landscape is undergoing rapid transformation, with policymakers and regulators grappling with the implications of a $240 billion global stablecoin supply that has surged in recent months. Former Reserve Bank of India (RBI) executive director G Padmanabhan has urged swift regulatory action to prevent policy drift akin to that seen with cryptocurrencies. Speaking at the Global Fintech Festival 2025, Padmanabhan emphasized the need for a distinct framework for stablecoins, differentiating them from speculative crypto assets. He highlighted the United States' progress with its electronic currency framework as a benchmark, warning that India risks losing ground in global financial coordination if it delays action.

The debate has intensified amid growing adoption of stablecoins for business payments and cross-border transactions. Stripe's launch of Tempo, a blockchain network for stablecoin transactions, underscores the asset class's utility in reducing costs and accelerating settlement times. Meanwhile, India's domestic stablecoin ecosystem remains unregulated, with users relying on foreign-issued tokens like USDT and USDC for remittances and portfolio diversification. The lack of legal clarity has created a gray zone, with transactions often occurring through offshore exchanges and fintech platforms.

India's cautious approach contrasts sharply with global trends. The U.S. passed the GENIUS Act in 2025, legitimizing stablecoins as regulated digital tokens backed by fiat assets and reinforcing the dollar's dominance in global finance. In Asia, countries like Japan, South Korea, and China Hong Kong are advancing government-backed digital currencies and pilot stablecoin programs. India, however, remains mired in bureaucratic delays, with no single authority taking ownership of stablecoin regulation. This has stymied institutional adoption and innovation, as noted by Aishwary Gupta of Polygon Labs.

The RBI's focus on its Central Bank Digital Currency (CBDC)-the e-rupee-has not resolved the need for private stablecoin integration. While the e-rupee's circulation reached Rs 1,016 crore by March 2025, its adoption remains limited. Critics argue that without a comprehensive framework, India risks missing opportunities to enhance its Unified Payment Interface (UPI) and digital banking infrastructure. The absence of regulatory clarity has also left banks hesitant to engage with stablecoins, exacerbating the gap between innovation and implementation.

Financial risks loom large. Experts warn that unchecked stablecoin adoption could fragment India's payment system, undermine monetary sovereignty, and expose users to systemic risks. The RBI has repeatedly cautioned against the potential for capital flight and illicit financial flows, citing the decentralized nature of stablecoins as a challenge to oversight. Recent cyberattacks on Indian exchanges, including a Rs 378 crore breach at CoinDCX in 2025, highlight vulnerabilities in the current ecosystem.

The government's approach balances caution with limited oversight. A 30% tax on crypto gains and a 1% tax deducted at source (TDS) on transactions aim to deter speculative trading. However, these measures have been criticized for pushing activity offshore, with 84% of respondents in a 2025 survey calling crypto taxes "unfair" compared to equity markets. Policymakers are now under pressure to strike a balance between fostering innovation and mitigating risks, particularly as India prepares for a Financial Stability Board (FSB) peer review in October 2025.

Globally, the SEC's recent no-action letter to DoubleZero-exempting its 2Z token from securities classification-signals a shift toward utility-driven token models. While this precedent may influence India's stance on functional tokens, the country's regulatory framework remains fragmented. With 20 million crypto users and rising fintech activity, India's next steps could shape its role in the digital financial architecture.

[1] India Faces Pressure on Stablecoin Rules as Supply Hits $240B (https://coinedition.com/india-stablecoin-regulation-urgency-rbi/)

[2] India's Crypto Dilemma: Navigating Regulations After US Stablecoin Law (https://bfsi.economictimes.indiatimes.com/articles/indias-crypto-dilemma-navigating-regulations-after-us-stablecoin-law/123008750)

[4] Stablecoin regulation in India stalls as Asia races ahead (https://defidonkey.com/en/crypto-regulation/stablecoin-regulation-in-india-stalls-asia-races-ahead/)

[6] SEC Grants No-Action Letter to DoubleZero for 2Z Token Distribution (https://coincentral.com/sec-grants-no-action-letter-to-doublezero-for-2z-token-distribution/)

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