In July 2025, the United States passed the GENIUS Act (Guarding End-User National Interests in Stablecoins), a landmark regulation that formally legitimizes payment stablecoins backed by liquid reserves like U.S. Treasuries.
The Act not only provides a clear regulatory framework but also signals to the world that the U.S. is ready to lead the next wave of innovation in digital finance.
But before we get on with this story, let us understand what is a stablecoin.
A stablecoin is a type of cryptocurrency that is designed to keep its value stable instead of fluctuating like Bitcoin or Ethereum.
How it works:
Its price is usually pegged (linked) to a stable asset such as:
- Fiat currency (like USD, INR, EUR) ? e.g., USDT (Tether), USDC
- Commodities (like gold) ? e.g., PAX Gold
- Or maintained by algorithms and reserves
Why they exist:
Regular cryptocurrencies are very volatile (their prices change rapidly). Stablecoins are useful for transactions, remittances, savings, and trading because they maintain a predictable value.
Types of stablecoins:
- Fiat-collateralized – backed 1:1 by money in bank reserves (e.g., USDC).
- Crypto-collateralized – backed by other cryptocurrencies (e.g., DAI).
- Algorithmic – not backed by assets but controlled by algorithms that expand/contract supply to keep the value stable.
Example: If you hold 1 USDT, it should always equal 1 U.S. Dollar, no matter how crypto markets move.
So, to take the story forward, the USA, as discussed earlier, introduced the GENIUS Act. Meanwhile, Singapore, the UAE, and China have accelerated their efforts to embrace digital currencies and stablecoins, recognizing their potential to modernize financial systems, boost cross-border efficiency, and spur fintech innovation.
India, however, remains on the fence. It has taken a conservative stance, often leaning toward restriction, with a burdensome tax regime (30% flat tax on crypto gains, 1% TDS) and regulatory ambiguity. But the global tide is turning—and India must act now or risk falling behind.
Why This Matters for India
India is the world's top remittance recipient—receiving $125 billion in 2023, according to the World Bank. With millions of Indians working abroad, stablecoins can radically improve the speed, transparency, and cost-effectiveness of these cross-border money flows.
Beyond remittances, stablecoins and tokenized assets could:
- Enhance financial inclusion by enabling access to USD or INR equivalents without traditional banking.
- Empower small businesses to transact globally without FX complexity.
- Serve as on-ramps for blockchain-based innovation across sectors.
What India Should Do
1. Establish a Clear, Tiered Regulatory Framework
Like the GENIUS Act, India should:
- License stablecoin issuers and require them to back tokens 1:1 with safe, liquid assets (e.g., RBI bonds, G-Secs).
- Enforce real-time audits, reserve disclosures, and consumer safeguards.
- Align with FATF AML/KYC recommendations and allow integration with IndiaStack and UPI.
Why it matters: This creates legal clarity, prevents misuse, and fosters trust for both domestic and international investors.
2. Launch Cross-Border Stablecoin Pilots
India should allow banks and NBFCs to test stablecoin use in corridors like:
- UAE–India, one of the largest remittance routes.
- Singapore–India, a fintech-rich corridor.
These pilots could be governed under the RBI’s Regulatory Sandbox Framework (Ref: RBI, 2021) and evaluated on parameters such as:
- Transaction cost reduction (currently 5–7% for many users).
- Settlement speed (real-time vs 1–3 days).
- FX rate transparency.
3. Collaborate on Global Standards
India must actively participate in frameworks shaped by:
- BIS Innovation Hub (Project Dunbar: Multi-CBDC for cross-border payments).
- IMF’s Digital Currency Roadmap (2023).
- G20’s Financial Stability Board (FSB) Stablecoin Regulation Guidelines.
Why it matters: Global alignment avoids fragmentation and protects against regulatory arbitrage.
4. Foster Domestic Innovation
Instead of pushing startups offshore, India must:
- Expand the FinTech Sandbox, making room for crypto/blockchain pilots.
- Offer tax clarity (e.g., distinguish trading from utility usage).
- Promote research and use-cases through IITs, IIMs, and NITI Aayog.
Case in point: India's Web3 talent is currently building for foreign firms due to unclear domestic regulations (Source: Nasscom Web3 India Report, 2023).
5. Balance Prudence with Progress
Yes, risks exist- speculative bubbles, hacks, or misuse for illicit activity. But proper guardrails—not prohibition—are the answer:
- Leverage India’s digital ID (Aadhaar), UPI, and Account Aggregator frameworks for secure, KYC-compliant access.
- Build tiered access controls (e.g., capped limits for retail users).
- Require redemption guarantees and allow RBI oversight.
Final Thought
The GENIUS Act is not just about stablecoins—it is a symbol of regulatory courage and foresight. It reflects the willingness of a nation to embrace the future of finance while protecting its core values.
India’s tech prowess, developer ecosystem, and public digital infrastructure give it an unparalleled advantage—but only if it acts decisively. With the right regulatory architecture, stablecoins could become India’s gateway to cheaper remittances, faster settlements, and digital financial leadership.
The choice now is not if India should regulate stablecoins, but how fast and how smartly it can do so.
Caution Note
This post is for educational purposes only. Readers are encouraged to approach stablecoin use and investments thoughtfully, responsibly, and in compliance with applicable regulations.
References
Frequently Asked Questions (FAQs)
Q1. What is a stablecoin?
A stablecoin is a cryptocurrency designed to maintain a stable value by pegging it to assets like fiat currency or commodities.
Q2. How are stablecoins different from Bitcoin or Ethereum?
Unlike Bitcoin or Ethereum, stablecoins aim to keep their price steady and avoid large fluctuations.
Q3. Why are stablecoins important for India?
Stablecoins can reduce remittance costs, speed up cross-border transfers, and support financial inclusion.
Q4. What types of stablecoins exist?
The main types are fiat-collateralized, crypto-collateralized, and algorithmic stablecoins.
Q5. Can stablecoins help small businesses in India?
Yes, they allow businesses to transact globally without facing foreign exchange complexities.
Q6. What risks are associated with stablecoins?
Risks include misuse for illicit activities, hacks, and speculative bubbles if not regulated properly.
Q7. Has India regulated stablecoins yet?
No, India has not introduced clear regulations, and current policies lean toward restriction and heavy taxation.
Q8. What is the GENIUS Act in the U.S.?
The GENIUS Act is a U.S. law passed in 2025 that formally regulates stablecoins backed by liquid reserves.
Q9. How can India test stablecoin use safely?
By launching pilot programs under the RBI’s Regulatory Sandbox to monitor costs, speed, and transparency.
Q10. What role can global cooperation play in stablecoin regulation?
Global cooperation helps avoid regulatory gaps, ensures standardization, and prevents misuse across borders.
Author
Dr. Manish Sinha
Director
Global Business School and Research Centre, Tathawade, Pune.