An INR-backed stablecoin issued on a public blockchain can weaken the Indian Economy.
A dollar-backed stablecoin is already strengthening the US🇺🇸 economy.
The plan that is working for the USA might also work in India's favour.
A "win-win" plan for India🇮🇳:
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A stablecoin backed by the Indian rupee on an open blockchain could challenge India's capital controls and affect financial stability.
In contrast, a stablecoin backed by the U.S. dollar supports U.S. power and promotes the use of the dollar worldwide.
The key difference is the role and position of the U.S. dollar compared to the Indian rupee in the global financial system.
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INR Backed Stablecoin: A Risk of Capital Flight.
India has capital controls, which means money cannot move in and out of the country freely.
The Reserve Bank of India (RBI) and the Foreign Exchange Management Act (FEMA) oversee these regulations.
These controls help protect the exchange rate, maintain foreign reserves, and stabilize the economy.
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If you issue an INR stablecoin on a permissionless chain:
Anyone can hold, send, or trade INR tokens globally.
That effectively circumvents capital controls.
The INR could start leaving India digitally, bypassing regulated channels.
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Result:
→ Capital flight.
→ Pressure on the rupee, inflation, and reduced control for the RBI.
→ Undermines monetary policy sovereignty.
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Rupee Is Not a Reserve Currency:
The INR isn’t widely used for international trade or reserves.
So offshore demand for INR is speculative, not productive.
Once it leaves the system, it won't come back as an investment; instead, it simply means we're losing value.
In short, an INR stablecoin could turn the rupee into a shadow currency without state control.
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USD-Backed Stablecoin: Reinforces U.S. Power
The USD Is Already Global.
The USD, the world’s reserve currency, is used for trade, debt, and reserves worldwide.
Over 80% of global trade and crypto transactions are already USD-denominated.
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Stablecoins like USDC or USDT:
Expands USD accessibility into crypto ecosystems.
Deepens global dollarization as more people and businesses rely on the USD.
Increases demand for U.S. Treasuries since they back stablecoins.
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