Stablecoins: The New Plumbing of Global Finance and India's Evolving Stance
UPSC Relevance
Prelims: Indian Economy (Money and Banking, Digital Currency, RBI, Blockchain technology); Science and Technology (Cryptocurrency).
Mains:
General Studies Paper 3 (Economy & S&T): Indian Economy and issues relating to mobilization of resources; Science and Technology- developments and their applications and effects in everyday life; Awareness in the fields of IT, Computers; Challenges to internal security through communication networks (related to money laundering and terror financing).
Key Highlights from the News
Stablecoins are a new type of digital asset aimed at addressing the price volatility of traditional cryptocurrencies.
They achieve price stability by linking their value to currencies like the dollar or other assets (backed by reserves).
Key Benefits:
Enable fast (within seconds) and low-cost cross-border payments.
Have the potential to become an alternative to traditional systems like SWIFT.
Facilitate "agentic payments" where AI can conduct transactions independently.
The entry of large financial institutions like BlackRock into this space and the establishment of regulatory frameworks by entities like the European Union (EU’s MiCA framework) indicate global acceptance of stablecoins.
A recent statement by India's Finance Minister suggests that India, which previously opposed private cryptocurrencies, now needs to engage with stablecoins. This shows India's evolving stance.
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