Dollar Stablecoins Pose Global Monetary Challenges

October 29, 2025 — The increasing adoption of U.S. dollar-backed stablecoins is likely to present challenges for monetary policy, financial intermediaries, and seigniorage globally, according to India’s Chief Economic Adviser (CEA) V. Anantha Nageswaran.

Speaking at an event in Mumbai, Nageswaran emphasized that the growing use of dollar stablecoins could affect monetary transmission and central bank revenue, particularly for countries outside the United States.

“The presence of a dollar stablecoin will bring with it its own challenges for monetary policy, monetary transmission and for seigniorage benefits of any country,” he said.

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Stablecoins vs Traditional Banking

The CEA noted that stablecoins will increase competition for banks, particularly in terms of deposit mobilization and financial intermediation. As more consumers and businesses adopt stablecoins, traditional banks may face pressure to adapt their services or compete for liquidity.

However, Nageswaran observed that India’s Unified Payments Interface (UPI) — a highly efficient domestic instant payment system — reduces the demand for stablecoins in the country compared to regions like the European Union or other advanced economies.

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Market Growth and Regulatory Context

Dollar stablecoins have surged in popularity due to favorable U.S. regulations, with the global market capitalization exceeding $300 billion. Their widespread adoption raises policy and regulatory questions for central banks worldwide, especially regarding financial stability and cross-border transactions.

India, meanwhile, is leaning against immediate legislation to regulate cryptocurrencies, continuing to rely on existing financial frameworks and UPI for domestic payments.

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Implications

• Monetary Policy: Stablecoins could dilute central bank control over money supply and interest rate transmission.
• Seigniorage Loss: Countries may lose revenue that comes from issuing fiat currency.
• Bank Competition: Banks may need to innovate or risk losing deposits and transaction fees.
• Global Coordination: Cross-border stablecoin usage may require international regulatory cooperation to manage financial stability risks.

Nageswaran’s comments underscore the need for policymakers to monitor stablecoin adoption closely as part of broader digital currency and fintech strategies.