Reduce friction: Let regulated stablecoins transform India's remittance economy

Mint

a day ago

Global economic volatility, driven by swings of the US dollar, conflicts like Russia-Ukraine and Israel-Iran, US trade tariffs and supply chain disruptions, has intensified financial uncertainty. These challenges create friction and barriers for cross-border payments, which are critical for India—it is the world's largest recipient of remittances at $125 billion in 2024, or 3.2% of GDP. Traditional transfer systems are costly, so they reduce the money in hand for domestic recipients to use.
India's digital public infrastructure (DPI), led by the Unified Payments Interface (UPI), which now accounts for nearly half of all real-time payments made globally by volume, provides a robust foundation. By integrating global stablecoins with the Reserve Bank of India's (RBI) central bank digital currency (CBDC), the e-rupee—which is pegged to the rupee and thus a 'stablecoin' too—India can leverage blockchain technology to streamline remittances, ensure digital sovereignty and position itself as a global 'Web 3.0 Valley.'
Also Read: Agentic payments are here: Why India needs a rupee-based stablecoin
Stablecoins are cryptocurrencies pegged to stable assets such as the US dollar, gold or the rupee, ensuring that its value does not yo-yo by demand and supply and reflects what a well-known currency is worth. While they share blockchain technology—a decentralized, secure digital ledger online—with volatile cryptos like Bitcoin, their design and use cases differ entirely.
Cryptos like Bitcoin are used as speculative assets, but a stablecoin acts like a medium of exchange. In 2024, stablecoins facilitated $27.6 trillion of global transactions, surpassing Visa and Mastercard, according to the World Economic Forum. This proves their scalability for cross-border payments.
Also Read: Rupee-backed stablecoins could complement RBI's digital currency
India's 36 million diaspora sends over $100 billion home annually, often through banks or money transfer operators, such as Western Union, which charge $12.70 on average for a $200 transfer and take days to remit funds, due to intermediaries, checks and other processes.
Stablecoins enable peer-to-peer transfers: a diaspora member converts fiat currency into a stablecoin via a digital wallet and sends the sum instantly to the wallet in India of a recipient, who converts it to rupees. The fee ranges from 0.5% to 3% (as low as $0.01 for every $200 sent), with transactions done in minutes, 24/7. This efficiency can reduce transaction costs drastically, while reaching out to the under-banked.
India's DPI, with UPI atop Aadhaar, supports over 900 million smartphone users. The interface processed 185 billion transactions in 2024-25, with Aadhaar's 1.3 billion unique identities easing know-your-customer (KYC) verification.
RBI's digital rupee uses blockchain for secure, low-cost transactions, complementing private stablecoins. Integrating it with rupee-pegged stablecoins can create a hybrid ecosystem, aligning with the UN's goal of reducing remittance costs below 3% by 2030, and lowering reliance on dollar-based stablecoins as well as Swift. This would support India's digital sovereignty.
Also Read: India's economy in 2024: A stable growth path is now within sight.
RBI's 2023 regulatory sandbox promotes blockchain innovations while ensuring compliance with KYC and anti-money laundering regulations. RBI-regulated rupee-pegged stablecoins would allow for monetary control and attract foreign direct investment (FDI), with transparent payment trails.
For trade competitiveness, blockchain and tokenization would streamline exports by digitizing assets and embedding controls as well as limits within tokenized contracts for compliance and transparency. Tokenized trade assets would reduce reliance on costly bank guarantees by enabling the securitization of credit through smart contracts, lowering costs and delays in global trade.
While RBI may want the e-rupee to get priority in the emerging world of digital currencies, policy steps such as tax incentives for blockchain startups and public-private partnerships could help by accelerating stablecoin adoption.
India's 7.7 million gig workers and 4.5 million software service professionals face job displacement. Web 3.0, a decentralized internet powered by blockchain, could help future-proof India's workforce against AI and automation risks. It enables resilience through tokenized credentials—digital records on blockchain—that allow workers to verify skills and access decentralized job markets globally. A developer in India could present verified credentials to secure remote work on international platforms without intermediaries.
Also Read: The rupee's digital future is far more relevant than its domestic heritage
With 1.2 million developers, India can lead in 3.0 innovation. Training in blockchain skills like smart contract development can reskill workers. RBI's blockchain hackathons and the National Education Policy's focus on digital skills support this transition. Expanding vocational training and incentivising universities to offer Web 3.0 courses can prepare millions for emerging roles.
Digital forces are converging that enable India to position itself as a potential Web 3.0 Valley. RBI's digital pivot balances innovation with stability, even as its regulatory sandbox rivals Singapore's, attracting global capital for Web 3.0 startups. Regulated rupee-pegged stablecoins integrated with the e-rupee can ensure compliance and scalability. This can transform India's remittances by reducing transfer costs and increasing the money in hand for recipients.
Meanwhile, blockchain-driven tokenization could be used to enhance export competitiveness by digitizing aspects that need leaps in efficiency. By fostering Web 3.0 innovation, reskilling its workforce and putting agile policies in place, India could aim for global leadership in a critical domain.
The authors are, respectively, adjunct professor of data and digital economy, and senior policy manager, Digital India Foundation.