What It Means for the Industry
At the October 2025 BFSI Leadership & Fintech Innovation Summit in Mumbai, industry leaders urged the government to accelerate digital-asset regulations and formally evaluate the launch of an INR-backed stablecoin as part of India’s evolving digital-payments ecosystem.
The discussion signals both a major opportunity and a narrow regulatory window for Web3 firms. If India introduces a structured framework, regulated rupee-pegged stablecoins could reduce remittance costs, expand cross-border rupee utility, and unlock new digital-finance products and services. With India handling over $125 billion in annual remittances, the potential impact is substantial. However, unclear policy design or prolonged delays may drive Web3 talent offshore and heighten risks to monetary stability.
Understanding the INR Stablecoin Proposal
A rupee-backed (INR-pegged) stablecoin is a digital token designed to maintain a steady 1:1 value with the Indian rupee. It achieves this through reserves held in cash, government securities, or short-term money-market instruments, or through a combination of collateral and algorithmic mechanisms. Think of it as a “digital rupee” that can move instantly across borders and blockchain networks while still holding the same value as the physical rupee.
Proponents at the Mumbai events said that an INR stablecoin could make cross-border payments cheaper and quicker, support international trade flows, and strengthen the global use of the rupee – calling it a potential “UPI moment” for cross-border payments. Since UPI’s launch in 2016, it has processed billions of transactions annually, proving how the right digital infrastructure can transform an entire payments ecosystem.
The benefits are real in principle. Globally, stablecoins such as USDC and USDT now process trillions of dollars in annual on-chain settlement, showing how tokenised fiat reduces friction and enables faster clearing where blockchain networks meet traditional banking rails. While traditional remittance channels often charge 6–8% per transfer, blockchain-based transfers can reduce that cost to 1–2%, depending on the corridor.
However, these advantages depend heavily on rigorous reserve management, trusted custody arrangements, and a clear regulatory perimeter. Several Indian speakers emphasised that any future framework must safeguard monetary sovereignty and financial stability while still encouraging innovation.
The RBI’s Dilemma: Innovation vs. Control
India’s official posture toward private stablecoins remains cautious. Senior Reserve Bank of India (RBI) officials have repeatedly highlighted risks that privately issued INR-pegged tokens could trigger currency substitution, weaken monetary transmission (i.e., the RBI’s ability to influence lending rates and money supply through policy actions), or divert deposits away from banks – concerns that reflect both prudential and systemic risks. For instance, in a December 2023 speech, Deputy Governor T. Rabi Sankar warned that stablecoins could “undermine monetary sovereignty and complicate policy transmission mechanisms.”
The RBI has echoed these concerns while advancing its own central bank digital currency (CBDC). India launched the digital rupee pilot in December 2022, expanding it to both wholesale and retail users through major banks such as SBI, ICICI and HDFC. As of mid-2025, the pilot has crossed millions of monthly transactions across selected cities. Industry experts say an INR stablecoin could either complement the CBDC by enabling programmable payments on public blockchains or compete with it by offering broader utility and global interoperability.
On the other side of the debate, industry groups such as the Bharat Web3 Association (BWA) and leaders from prominent exchanges including CoinDCX and WazirX urged policymakers at recent BFSI and fintech forums to provide clearer rules so domestic innovation is not pushed offshore. They emphasised that prolonged uncertainty already affects project pipelines, engineering talent, and venture investment.
Evidence of regulatory arbitrage is visible: multiple Indian Web3 startups relocated to Dubai, Singapore, and Hong Kong between 2023 and 2024. Industry sources estimate that more than 80 Indian blockchain and crypto teams shifted to Dubai alone during this period, citing tax clarity, dedicated digital-asset frameworks, and friendlier licensing environments.
What Regulators Will Demand: A Framework Emerges
If policymakers decide to enable INR-backed stablecoins, Web3 firms should anticipate a stringent regulatory architecture. Drawing from global frameworks such as the EU’s MiCA regulation, Singapore’s stablecoin rules, and Japan’s revised Payment Services Act, India is likely to require the following:
1. Reserve Transparency and Custody
Rules will almost certainly mandate full reserve backing, strict disclosure standards, independent audits, and the use of qualifying custodians. Eligible collateral may be limited to cash, T-bills, and short-term government instruments – in line with Singapore’s MAS framework, which requires stablecoins to maintain high-quality liquid assets.
2. Licensing and Supervised Entities
Issuers, custodians, and on/off-ramps – including exchanges and payment service providers – will likely need explicit licensing. India may extend or adapt existing laws such as the Payment and Settlement Systems Act (PSSA) 2007, and align stablecoin issuers with categories similar to prepaid payment instruments (PPIs) or electronic money issuers. Prudential safeguards (capital requirements, net worth norms, fit-and-proper criteria) will accompany this.
3. AML/CFT and KYC Compliance
Any stablecoin operating in India must satisfy the Prevention of Money Laundering Act (PMLA) 2002, plus the KYC norms used by banks and payment institutions. India has tightened AML rules significantly since 2023, bringing crypto exchanges under reporting obligations – meaning onboarding, monitoring, suspicious-transaction reporting, and enhanced due diligence will all apply to stablecoin issuers and intermediaries.
4. Interoperability with Domestic Payment Rails
Regulators will examine how a stablecoin integrates with UPI, RTGS/NEFT, and the CBDC pilot, with a focus on operational resilience, settlement finality, and preventing double-counting of liabilities.
For example:
– Can users convert digital rupee (e₹) to an INR stablecoin instantly?
– Will bank settlement cycles need adjustment if stablecoins circulate 24/7 on public chains?
– How will regulators ensure no overlap between tokenised liabilities and bank deposits?
5. Monetary-Policy Buffers
To mitigate currency substitution and systemic risk, policy may impose issuance caps, limits on foreign usage, or rules on reserve composition. Such limits could define the total permissible INR stablecoin float relative to India’s M1 money supply or restrict any single issuer from exceeding a defined market share.
These guardrails are not hypothetical – jurisdictions that moved from prohibition to controlled acceptance followed similar blueprints. Under MiCA, the EU requires full reserve backing, strict disclosures, and caps on “significant” stablecoins. Singapore’s 2023 MAS rules mandate 1:1 backing, monthly attestation, and redemptions within five days. India’s eventual framework will likely align with these priorities: financial stability, customer protection, and safeguarding the integrity of its payments ecosystem.
What this means for Web3 firms – practical roadmap
For Web3 firms operating in or serving India, this moment represents a critical preparation window. With potential legislation and regulatory drafts expected within the next 12–18 months, firms now have a limited period to position themselves before formal rules arrive.
1. Engage Constructively With Policymakers
Submit technical briefs, offer sandbox proposals, and demonstrate robust risk-mitigation measures such as proof-of-reserves systems, custodial segregation, and audit frameworks. Multiple industry leaders at the Mumbai summit emphasised that early, collaborative engagement can shape rules rather than react to them.
2. Reassess Product Architecture
Refine token economics, reserve models, issuance logic, and custody flows with a conservative approach. Ensure complete segregation between issuer assets and customer funds, anticipating requirements similar to MiCA or Singapore’s MAS framework.
3. Strengthen Compliance Capabilities
Begin building AML/KYC infrastructure aligned with India’s PMLA and FATF standards.
Consider integrating FATF Travel Rule compliance tools and blockchain analytics platforms such as Chainalysis, Elliptic, or TRM Labs for real-time risk scoring, transaction monitoring, and sanctions screening. Develop licensing roadmaps that map to India’s payments, securities, and PSS Act regimes.
4. Plan for Interoperability With Domestic Rails
Prototype how a tokenised INR could interact with banking partners, wallets, UPI, and the e-rupee/CBDC pilots.
Early movers who successfully demonstrate safe CBDC–stablecoin interoperability will have a strategic advantage in future licensing or pilot inclusion.
5. Prepare Cross-Border and Contingency Structures
If onshore issuance is delayed or constrained, explore compliant legal structures that allow offshore issuance with onshore oversight, while keeping engineering teams and intellectual property anchored in India. This reduces the risk of offshoring talent unnecessarily while maintaining regulatory alignment.
Policy trade-offs India must weigh
Policymakers face a choice: move too fast without safeguards and risk monetary fragmentation and systemic exposures; move too slowly and forgo a chance to anchor digital innovation and payments rails to the rupee. The summit’s debate showed both impulses clearly: industry wants enablement and clarity, while the RBI and some policymakers insist on strict protections for monetary sovereignty. Any practical framework will need to balance these trade-offs with phased rollouts, strong prudential requirements and a clear enforcement posture.
Key Takeaways for Web3 Firms
India’s recent summit discussions have opened a real – but tight – regulatory window. For Web3 firms, the sensible course is proactive, practical engagement: build conservative, auditable stablecoin architectures; shore up compliance; and work with regulators in sandboxes or pilot programs that demonstrate safety and public-interest benefits. That approach reduces legal and operational risk while positioning firms to benefit if India formalises a framework that embraces rupee-pegged tokenisation.
If your organisation needs help mapping licensing implications, drafting technical-legal submissions for regulators, or building compliant proof-of-reserves and custody models for an INR-pegged token, we can prepare a compliance-first plan tailored to the legal and regulatory contours signalled at the Mumbai events. (We drew the factual basis of this briefing from recent coverage of the BFSI/fintech summits and central bank commentary.)
At Cryptoverse Lawyers, our team specialises in digital asset regulations, VASP compliance, and Web3 legal frameworks across jurisdictions. We help exchanges, fintechs, and blockchain innovators operate confidently within India’s evolving regulatory environment.
Connect with our legal experts today to develop compliant structures and stay ahead of upcoming digital asset regulations in India.
Frequently Asked Questions
1. What is an INR-backed stablecoin?
An INR-backed stablecoin is a digital token pegged 1:1 to the Indian rupee, backed by reserves such as cash or government securities. It works like a digital rupee that can move instantly across blockchain networks.
2. Why is India considering a rupee stablecoin?
India is exploring an INR stablecoin to improve cross-border payments, reduce remittance costs, support trade settlement, and strengthen the rupee’s global use. It also aligns with the broader push toward digital public infrastructure.
3. How does this relate to India’s CBDC (Digital Rupee)?
The CBDC is issued directly by the RBI, while stablecoins are issued by private entities. An INR stablecoin could either complement the digital rupee by enabling public-chain interoperability or compete with it depending on how regulations evolve.
4. What regulatory concerns does the RBI have?
The RBI has flagged risks such as currency substitution, weakened monetary-policy transmission, financial stability concerns, and potential erosion of banking deposits if private stablecoins scale without safeguards.
5. What compliance rules will stablecoin issuers need to meet?
India may require strict reserve backing, licensed issuers, regulated custodians, AML/KYC compliance under PMLA, interoperability with UPI and banking rails, and limits on issuance to protect monetary sovereignty.
6. How can Web3 firms prepare for upcoming stablecoin regulations?
Firms should strengthen compliance systems, build interoperable product architectures, test CBDC-friendly models, engage with policymakers early, and create cross-border structures that remain compliant with Indian oversight.
7. Will INR stablecoins reduce remittance costs?
Potentially yes. Traditional remittances cost 6–8%, whereas blockchain settlements can reduce this to around 1–2%. Final impact depends on regulatory approval and banking integration.
8. Could INR stablecoins boost the rupee’s global usage?
Yes. A regulated INR stablecoin could support trade invoicing, cross-border B2B payments, and digital-asset settlement using the rupee, giving it a larger role in global transactions.