Global regulators are more and more demanding resolute government intervention in stablecoins - cryptocurrencies pegged to fiat currencies such as the US dollar - to protect financial stability and maintain monetary sovereignty.
In India, former RBI Executive Director G. Padmanabhan emphasized the growing need for the government to adopt a clear regulatory stance on stablecoins. Speaking on Monday, he warned against a repetition of the prolonged period of indecision that characterized previous attempts at crypto regulation. He emphasized that regulatory clarity is essential to prevent ambiguity and protect the financial system from unforeseen risks.
Simultaneously, in the United States, Reuters says dollar-backed stablecoins - nearly reaching a market cap of $280 billion - are potentially cementing the dominance of the US dollar globally.
Economist Hélène Rey cautioned that the privately-issued digital currencies will only serve to build upon America's ‘exorbitant privilege,’ supported by legislation such as the GENIUS Act that insists on liquid asset backing. But this balance creates risks of financial instability and weakening non-US bond demand
In Europe, ECB Chief Christine Lagarde called on legislators to enact tough equivalence regulations on overseas stablecoin issuers in the EU. Local stablecoins are already regulated by the EU through MiCAR.
However, foreign issuers, Lagarde cautioned, will need to meet the same high standards to avoid draining reserves during periods of financial strain. She also advocated for global cooperation to preempt regulatory arbitrage.
Sharing these views, the Bank for International Settlements termed stablecoins as a possible risk to financial stability and monetary sovereignty. Its 2025 annual report warned that in the absence of proper regulation, stablecoins may erode faith in conventional money systems.
Contributing to the chorus, the ECB cautioned that universal adoption of US dollar-backed stablecoins would reduce the institution's influence over Eurozone monetary conditions and drew comparison to ‘dollarisation’ among emerging economies. The ECB is promoting a digital euro as a remedy.