The Reserve Bank of India (RBI) harshly poured cold water on stablecoins in its latest Financial Stability Report. Their core message is straightforward: countries should prioritize developing CBDCs because private stablecoins not only threaten financial stability but also undermine the singularity of the monetary system, laying the groundwork for systemic risks.

Does this sound a bit absolute? But looking at the three issues they listed makes it clear.

First is the collapse of monetary singularity. Private stablecoins are essentially liabilities of private institutions, fully dependent on reserve quality, governance standards, and market confidence. When financial pressure mounts, users may rush to redeem en masse, causing liquidity to dry up immediately. This contradicts the fundamental principle that "money is ultimately settled by the central bank," fragmenting the entire monetary system.

Second is the amplification of financial instability. When markets tighten, stablecoin holders may withdraw funds on a large scale, or reserve assets may lose liquidity; the risk is not absorbed but magnified. Private institutions lack the "lender of last resort" capability that central banks have, so once systemic risk hits, they are unable to withstand it.

The third issue is even more sensitive: erosion of sovereignty. Stablecoins pegged to the US dollar can easily lead to "dollarization," directly impacting monetary sovereignty, interfering with the central bank's policy transmission, and potentially bypassing capital controls, thereby disrupting the financial order of emerging markets.

The Deputy Governor of RBI even said more harshly: India's UPI payment system is already highly efficient; stablecoins have no practical value and instead create uncontrollable risks.

So what about CBDCs? RBI believes this is the foundation of the future. Because CBDCs are direct liabilities of the central bank, backed by national credit and absolute legal tender, they can firmly maintain monetary singularity, serving as the last line of defense for the financial system.