GENIUS Act: Stablecoins vs Digital Rupee: Compare

Introduction

I came across a new piece related to the GENIUS Act passed in the US last week.

It’s about stablecoins, those crypto tokens pegged to currencies like the dollar.

What are stablecoins? These are digital currencies tied to a stable asset, like the US dollar (or say Indian Rupee). This way, their value is more stable, unlike Bitcoin, which can be very volatile. Think of them as digital cash you can use online – safe, predictable, and great for payments or transfers. So, is the Indian Digital Rupee (e₹) can be called as a Stablecoin? The answer is no. We’ll see why later in this article (jump here).

At first, I thought GENIUM was just another financial regulation. But as I dug deeper, I realised this could change how money moves globally.

Will it have effect in India? I think yes.

So let’s understand what this GENIUS Act is what it means for un in India.

What’s the GENIUS Act All About?

The GENIUS Act is Guiding and Establishing National Innovations for US Stablecoins. It isn’t just a catchy name.

GENIUS is now a law that brings stablecoins under strict US financial rules.

Think full reserve backing, regular audits, and anti-money laundering checks.

Sounds like typical banking stuff, right?

But there is a twist. This law isn’t just about regulating crypto. It’s about the US cementing its grip on global finance.

Stablecoins like USDC and Tether are now dollar proxies. They’re digital dollars, but run by private companies under US oversight.

The US isn’t launching its own digital currency yet. Instead, it’s letting these stablecoins do the heavy lifting.

Why Stablecoins Matter to the World

Stablecoins are crypto tokens tied to stable assets, usually the US dollar.

They’re not like Bitcoin, which swings wildly. Stablecoins are steady, making them perfect for payments, trading, and remittances.

Globally, they’re already huge. USDC and Tether handle billions in transactions daily.

The GENIUS Act makes these stablecoins legit.

They’re now part of the global financial system, backed by US regulations.

This means faster, cheaper cross-border payments. Imagine an Indian exporter settling a deal in minutes, not days, without hefty bank fees.

Sounds tempting, doesn’t it?

But there’s a bigger picture. The US is using stablecoins to keep the dollar king.

Even as some countries talk about ditching the dollar, stablecoins ensure it stays relevant.

It’s like the US found a way to use the crypto wave to stay in control of the global currency market.

What’s in It for India?

For India, stablecoins could also be a game-changer.

Our fintech scene is also very fertile. We have payment companies like UPI, Paytm, and PhonePe.

Stablecoins could make cross-border payments smoother. If these payment partners start accepting transfers using stablecoins, it will be a gamechanger.

• Exporters could settle trades faster.
• NRIs could send remittances without losing a chunk to fees.

It’s efficient and cost-effective.

But there’s a problem too.

The more we use dollar-backed stablecoins, the more we tie ourselves to the US financial system. Our rupee’s value could take a hit.

Capital flows could get harder to control. The Reserve Bank of India (RBI) might struggle to manage money supply or interest rates.

Ever wondered what happens when a foreign currency sneaks into your economy through crypto? And remember, this will happen without RBI knowing it. It is possible.

The Risks We Can’t Ignore

I heard this term on moneycontrol, “Cryptoisation.”

It’s a fancy term for a real problem.

If dollar stablecoins become too popular, they could create a shadow money system.

It’s mobile, hard to tax, and out of RBI’s reach.

Imagine trying to control inflation when half the transactions are in digital dollars. It will be like impossible, right?

There’s also a stability risk too.

If a major stablecoin like Tether faces a crisis, say, a run on its reserves, the fallout could hit India hard. Emerging markets like ours are already seeing rising stablecoin use. A single shock could ripple across borders, causing liquidity issues.

India’s Crypto Dilemma

India’s stance on crypto has been cautious.

The RBI has been skeptical, even hostile.

A few years ago, it tried banning crypto transactions. That didn’t work out.

Now, with the GENIUS Act, the game has changed. A blanket ban won’t cut it anymore.

Stablecoins are too useful to ignore. So, what should India do?

We could embrace foreign stablecoins with tight rules. Or we could build our own rupee-pegged stablecoin. But doesn’t India we already have a stablecoin of its own?

Is Digital Rupee (e₹) a Stablecoin?

The Digital Rupee (e₹) is not a stablecoin in the traditional sense. Let me explain this in simple terms.

What’s the Digital Rupee (e₹)?

It is India’s Central Bank Digital Currency (CBDC), launched by the RBI in December 2022. It’s a digital version of the Indian rupee, issued and controlled by the RBI. You can read more about Digital Rupee (e₹) here.

What’s a Stablecoin?

They are digital currencies tied to a stable asset, like the US dollar, to keep their value steady. They’re usually created by private companies, like Tether (USDT) or USD Coin (USDC), and run on decentralized blockchains.

Why the Digital Rupee Isn’t a Stablecoin?

Here’s where the e₹ stands apart from stablecoins in the Indian context:

Aspect	Digital Rupee (e₹)	Stablecoins
Issuer	Issued by the RBI, India’s central bank. It’s a sovereign currency and legal tender.	Issued by private companies (e.g., Tether, Circle). No central bank backing.
Purpose & Control	Complements cash, boosts financial inclusion, cuts printing costs. Tightly controlled by RBI for monetary policy alignment.	Used for payments, trading, remittances in a decentralized system. Less regulated, higher risk of fraud or mismanagement.
Value Pegging	It is the rupee, with a 1:1 value to physical cash. No pegging needed.	Pegged to assets like the US dollar or rupee by private issuers. Value depends on reserve reliability.
Use in India	Integrated with UPI, backed by banks like SBI, ICICI, HDFC. Pushes digital economy.	Mostly used in crypto trading or remittances. Faces RBI’s regulatory restrictions. Rupee-backed stablecoins are possible but not yet mainstream.

Could a Rupee-Backed Stablecoin Exist?

Yes, it’s possible. Some experts suggest India could develop rupee-backed stablecoins, issued by private players but regulated by the RBI. These would complement the e₹ by offering more flexibility for cross-border payments or trade.

Who Else Have Stablecoins

The US isn’t alone in this race.

China’s pushing its e-CNY. The EU is working on a digital euro. Some countries are even trying gold-backed stablecoins.

But none match the dollar’s dominance yet.

The GENIUS Act is a masterstroke. It uses private stablecoins to extend US influence without a central bank digital currency.

For India, this is a wake-up call. We can’t just react. We need a strategy. Should we double down on the Digital Rupee (e₹)? Or create a hybrid model with regulated stablecoins?

The clock’s ticking, and the world’s not waiting.

Time to Act Smart

As an Indian, I’m both excited and worried.

Stablecoins could boost our economy. They could make payments faster and trade smoother.

But they also threaten our financial independence.

The RBI needs to find a balance.

We can’t shut the door on innovation, but we can’t let dollar stablecoins run the show either.

I think India should push the Digital Rupee (e₹) harder. A rupee-backed digital currency could protect our sovereignty.

It could also give our fintech startups a new playground. But we need to move fast. The US has already set the pace.

Have a happy investing.