India’s crypto sector is back in the news after CoinDCX CEO Sumit Gupta pitched the potential for INR-backed stablecoins. His pitch is focused on how UPI Payments, which has become among the largest digital networks in the world, could play a foundational role in this potential financial innovation. This proposal comes at a time when India is advancing the digital rupee discussion and facing regulations around crypto.
UPI Transaction Growth Signals a Turning Point
Gupta’s concept directly utilizes the astronomical increase in UPI Payments. This level of increase demonstrates how UPI has become synonymous and a relied-upon system for households, businesses, and institutions. The CEO of CoinDCX proposed that through stablecoins backing INR, India could make an advantageous, transparent payments system where local circumstances would encourage a CI and regulatory framework to reveal India as efficient vs. its peers on costs.
Stablecoins built on UPI could achieve an approximately 90% reduction in remittance costs. This type of milestone would significantly take the financial burden off remittance users, while at the same time solidifying India’s position within global digital payments.
Digital Rupee Push Gains Momentum
The proposal aligns with the government’s broader initiative to introduce the digital rupee, aiming to strengthen the Indian economy against dollar hegemony. UPI has already transcended the traditional views of payment systems being limited to routine purchases and everyday transactions, and has expanded to customs duties and export-oriented initiatives like RoSCTL and RoDTEP. The proposal from the CoinDCX CEO relates to the momentum covered and could add to the possible derailment of government efforts, at least by suggesting a stablecoin backed by INR in conjunction with other INR frameworks (e.g., UPI).
At the same time, the proposal highlights how technology can transform legacy systems into flexible and nimble platforms that can facilitate real-time interaction. By enabling wider use of AI-enabled settlement systems, it can make UPI not only faster but also smarter by allowing it to potentially take predictive action to effectively manage transaction flows, automatically detect potential risks sometimes, and ensure compliance without the need for human intervention.
Regulatory Hurdles Remain Strong
While optimism surrounds the sector, India’s regulation continues to impose complications related to crypto. The 30% crypto tax initiated in 2022 still discourages even partial participation in the sector, contributing to uncertainty for investors and developers. Gupta’s intention to push for INR-backed stablecoins through UPI will likely create debate within certain government circles around the merits of providing “disruptive innovation” and crypto versus stability and control.
AI-driven compliance solutions may become crucial here, helping regulators monitor transactions in real time and reducing risks of misuse. The involvement of AI could also ensure that UPI-integrated stablecoins maintain transparency without compromising security, a concern long associated with crypto adoption.
Stablecoins and Financial Inclusion in Rural India
Outside of our major cities, INR-backed stablecoins still have a great deal of potential for financial inclusion. A 2023 report from the National Institute of Public Finance and Policy noted that stablecoins could give a significant boost to the rural economy within India by making both cross-border and domestic transfers instant and inexpensive. AI-driven transaction monitoring could very well be at the heart of resolving the issues of volatility to ensure stablecoin adoption does not create market shocks or expose rural users to fraud and misuse.
About The Author
