Zerodha’s Nikhil Kamath Advocates Gold-Backed Stablecoin as India Holds Over 25,000 Tonnes of Household Gold, Warning That Rising Dependence on Dollar-Linked Crypto Assets Could Weaken India’s Long-Term Financial Sovereignty and Digital Economic Independence
The co-founder of Zerodha, Nikhil Kamath, suggested that India should explore a gold-based stablecoin instead of a dollar-linked stablecoin. This step could unlock value from the massive quantity of idle gold held by households across the country and also ease the dependence on the US dollar-based financial system in the long run.
Kamath recently hailed UPI as a significant milestone in the field of digital finance innovation in a LinkedIn post. While also cautioning that the growing popularity of dollar-backed stablecoins may not be in India’s long-term economic interest, Kamath noted that “UPI has been incredible for India to say the least.”
Concerns Over Dollar-Backed Stablecoins
Stablecoins are cryptocurrencies that are typically backed by a fiat currency, such as the US dollar, to minimize price fluctuations and enable quicker digital transactions. The assets are being increasingly utilized globally for cross-border payments, settlements and decentralized finance (DeFi) applications.
However, Kamath warned of a potential erosion of monetary sovereignty and consolidation of the US financial system if dollar-backed stablecoins become widely used in emerging markets.
“To all the smart folk, some friends of mine who champion the need for dollar-backed stablecoins, this seems like a bad idea, long term, for India,” Kamath stated.
He also praised Indian policy makers for their cautious stance on private cryptocurrencies and foreign-funded digital assets.
“Credit where it’s due, to the Modi govt and Indian regulators, you probably got this one right in the face of a lot of pressure,” Kamath added.
Gold-Backed Stablecoin Could Unlock Idle Wealth
Instead of relying on dollar-pegged digital currencies, Kamath suggested India could create a gold-backed stablecoin that operates on a blockchain.
Indian households are estimated to own over 25,000 tonnes of gold, making India one of the largest consumers and holders of the precious metal globally. Many of these assets are not being used to produce returns on investment but rather are sitting unused in people’s homes or lockers.
Kamath proposed using blockchain technology to tokenize gold reserves, thereby enabling a new financial system and maintaining their value in the physical world.
“On the other hand, if there were a gold-based stablecoin, and one could monetize the unutilised gold in Indian households to return a yield, I don’t know enough to talk about this, but thoughts?” he said.
Also Read: IMF Warns $300B Stablecoins, $27.7B Tokens May Speed Financial Crises
India’s Digital Finance Strategy Remains Cautious
Till now, India has taken a cautious approach to private cryptocurrencies based on the fear of financial instability, capital flight and investor protection.
At the same time, the country has aggressively expanded its own digital public infrastructure. UPI has emerged as one of the world’s biggest real-time payment systems and the Reserve Bank of India is also conducting tests for the digital rupee under its central bank digital currency (CBDC) project.
Kamath’s remarks have now added a new dimension to the debate on whether the future of India’s digital financial system should be defined by a digital rupee, dollar-backed stablecoins, or blockchain assets backed by gold or other real-world assets.
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