Zerodha’s Kamath Warns Dollar Stablecoins Risk India Sovereignty

Kamath’s suggestion of a gold-backed stablecoin taps into India’s deep cultural and economic relationship with gold. India is one of the world’s largest importers of gold, typically bringing in 800–900 tonnes annually, and households hold significant wealth in physical gold. A digital token backed by gold reserves could offer a familiar store of value without the dollar dependency. Existing gold-backed tokens such as PAX Gold (PAXG) and Tether Gold (XAUT) are already traded on crypto exchanges, part of the growing real-world asset (RWA) tokenization trend. They are denominated in dollars and primarily held outside India. A rupee-denominated, domestically regulated gold-backed stablecoin would be a different construct. It would require a custodian to hold physical gold, regular audits, and a legal framework to ensure redemption rights. The mechanism could appeal to Indian investors seeking an inflation hedge without exposure to foreign exchange risk.

The practical hurdles are significant:

• Gold price volatility introduces redemption risk.
• Custody and audit requirements demand trusted third parties.
• Regulatory classification remains unclear–commodity, currency, or security.
• India’s foreign exchange controls and gold import restrictions add legal complexity.

Any gold-backed stablecoin would need to navigate India’s strict foreign exchange rules and gold import restrictions. The next concrete marker will be any official response from the RBI or the Ministry of Finance to the idea, or further details from Kamath on how such a stablecoin would be structured.

India’s Crypto Policy Crossroads

India’s regulatory stance on crypto has been inconsistent. A draft bill in 2021 proposed banning all private cryptocurrencies. Later discussions shifted toward regulation and taxation. The government introduced a 30% tax on crypto gains and a 1% TDS on transactions, signaling a move to track rather than ban. The RBI’s digital rupee pilot is already underway, testing both wholesale and retail use cases. Kamath’s intervention could influence the debate by offering a private-sector alternative that aligns with national interests–reducing dollar dependence while leveraging gold.

Traders and investors should watch for signals from Indian regulators on stablecoin policy. Any move to accommodate gold-backed tokens could open a new asset class on Indian exchanges. The debate also highlights the broader global tension between dollar-denominated crypto infrastructure and national monetary sovereignty. For now, Kamath’s warning serves as a catalyst for a conversation that India’s policymakers have yet to fully engage.