India: GENIUS Act or Digital Rupee?

Explore how the US GENIUS Act pushes dollar-backed stablecoins and India counters with its Digital Rupee and UPI strategy.

Introduction

The world of money is changing quickly. In the past, most international trade and financial dealings relied on the US dollar. Even today, the dollar dominates world trade. Nearly half of all trade invoices are in dollars, and almost ninety per cent of foreign exchange transactions use it. However, with new digital technologies, countries are beginning to rethink how they trade and pay. As Amitendu Palit notes in “The Geoeconomics of GENIUS” (The Financial Express, September 11, 2025), the United States is using the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act to push dollar-backed stablecoins as the next tool of global financial power. In this debate, India is caught in the middle. On one side are the pressures of global trends shaped by America’s digital dollar strategy. On the other side is India’s cautious approach, centred around its own Digital Rupee and its hugely successful Unified Payments Interface (UPI) system. This essay argues that while India’s caution gives it valuable short-term protection from the risks of dollar-backed stablecoins, the long-term global spread of US digital money may still leave India with little choice but to adapt.

The US Push

The United States has always guarded its position as the centre of global finance. Its dollar has acted as the backbone of trade, investment, and reserves across the world. Now, the US wants to ensure its dominance continues into the digital era. To do this, it has introduced the GENIUS Act. This law creates a framework for stablecoins that are backed by the US dollar or safe assets like US government bonds. The plan is simple but powerful: make dollar-backed stablecoins the most trusted and widely used digital money. This would keep the dollar strong in the digital future and prevent rivals such as China from building competing systems. By allowing private companies to issue these coins, but keeping them linked firmly to the dollar, the US hopes to attract both risk-loving crypto users and risk-averse investors who want stability.

India’s Concerns

India, however, is not rushing to embrace this US plan. Policymakers in New Delhi and at the Reserve Bank of India have several concerns. The first is monetary sovereignty. If people and businesses start using dollar-backed stablecoins for trade and payments, India’s central bank would lose control over the flow of money. This could make it much harder to manage inflation, interest rates, and financial stability. Another fear is capital flight. If stablecoins are easy to use, large sums of Indian money could quickly move out of the country, making the economy unstable. Finally, there is a worry that India could become dependent on foreign payment systems, which might weaken its strong position as a leader in digital payments thanks to UPI. These concerns explain why the government is moving carefully, testing its own Digital Rupee, and not giving legal recognition to private stablecoins.

Palit’s Prediction

Economist Amitendu Palit argues that despite India’s cautious stance, the pressure to use dollar-backed stablecoins will be inevitable in the long run. He points to history as evidence. The US dollar became the global currency not because countries loved it, but because it was practical, liquid, and backed by a strong economy. In his view, the GENIUS Act will create similar conditions for stablecoins. Once global trade starts shifting towards them, countries like India will not be able to resist. Palit also warns that digital money will replace tariffs as America’s main weapon in global economic rivalry. Just as the US once used trade duties to pressure countries, it will now use dollar-stablecoins to enforce its influence. For Palit, India may try alternatives like local currency trade or CBDCs, but the structural power of the dollar will still win out in the end.

Short-Term Wisdom

In the next three to five years, however, India’s approach seems sensible. The world of stablecoins is still in flux. Many questions remain: are they safe, who regulates them, and what happens if the companies behind them fail? By waiting, India avoids jumping into an uncertain system. At the same time, it strengthens its own systems. UPI is already a global model for instant payments, and the Digital Rupee is being tested in both wholesale and retail forms. This gives India breathing space to shape its own path before foreign stablecoins flood the market. In short, India is building buffers while the rules of the digital currency game are still being written.

Long-Term Reality

But looking five to ten years ahead, Palit’s warning becomes harder to dismiss. If dollar-backed stablecoins become the standard for trade and debt settlements worldwide, India will face strong pressure to join in. The risk is that refusing to adopt them could isolate Indian businesses or raise costs for trade. Just as it became almost impossible to avoid the dollar in the twentieth century, the twenty-first century might make it equally hard to avoid dollar-stablecoins. The US has the power, reach, and legal framework to push its system globally. Unless India, with allies like BRICS, can create a strong alternative, the balance will tilt towards Palit’s vision of inevitability.

Global Rivalries

Adding to this mix is the growing US-China rivalry. China is working on its own digital yuan and may even create yuan-backed stablecoins. For India, this could mean facing competing pressures: adopt US-backed stablecoins or explore Chinese-led alternatives. Either choice comes with risks. Siding too much with the US could limit India’s autonomy. Leaning towards China would create strategic dependence on a rival power. This is why India is so focused on building its own digital currency—it wants a seat at the table rather than being forced to choose sides.

Strategic Balance

The most likely path for India will be a strategy of balance. In the short run, it will protect its sovereignty with the Digital Rupee and cautious regulation. But in the long run, if dollar-stablecoins dominate, India may have to use them alongside its own systems. The challenge will be to ensure this does not weaken its financial independence. By delaying decisions now, India buys time to prepare for negotiations later. The country’s leaders know that when the digital currency order is clearer, they must enter the game on their own terms.

Conclusion

So who sounds more convincing? In practice, both are right—but at different timescales. In the short term, the Indian government’s caution looks wise. Stablecoin frameworks are still evolving, and rushing in could expose India to risks like capital flight or digital dollar dominance. India’s Digital Rupee and UPI system give it breathing room. In the long term, though, Palit’s prediction may prove correct. If the GENIUS Act succeeds and dollar-backed stablecoins become the default for trade and debt, pressure on India will grow. At that point, resisting might be costlier than adapting. Just as the dollar became unavoidable in the last century, dollar-stablecoins may become unavoidable in this one. The real question for India is not whether to resist or adopt, but how to prepare for a world where both caution and adaptation will be necessary.

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The Source’s Authority and Ownership of the Article is Claimed By THE STUDY IAS BY MANIKANT SINGH