Challenges of Implementing Gold-Backed Stablecoins in India
Can Indians earn from idle gold through stablecoins? Why CoinSwitch co-founder sees challenges in Nikhil Kamath’s idea
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Nikhil Kamath's proposal for a gold-backed stablecoin to monetize idle gold in Indian households faces significant challenges, according to Ashish Singhal, Co-founder of CoinSwitch. Issues like regulation, trust, and the non-standardized nature of gold holdings in India complicate the implementation of such financial products.
- 01Nikhil Kamath advocates for a gold-backed stablecoin to monetize idle gold in India.
- 02Ashish Singhal highlights existing global products but notes challenges in India's gold market.
- 03India's gold is largely in non-standard forms like jewelry, complicating verification and storage.
- 04Gold-backed stablecoins require investment-grade gold, which differs from common household holdings.
- 05Returns on gold typically come from lending or financial structuring, adding risk.
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Nikhil Kamath, a prominent figure in the Indian financial sector, has proposed a gold-backed stablecoin aimed at monetizing the estimated 25,000 tonnes of idle gold in Indian households. However, Ashish Singhal, Co-founder of CoinSwitch, pointed out that while such products exist globally, the unique challenges posed by India's gold market hinder their feasibility. Most of India's gold is in the form of jewelry and heirlooms, which complicates standardization and storage needed for products like PAXG and XAUT. Furthermore, Singhal noted that gold does not generate income on its own, and any returns would involve lending or financial structuring, introducing additional risks. The discussion also touches upon the broader regulatory landscape for stablecoins, emphasizing the need for international standards to ensure their effectiveness in the global payment system.
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The implementation of gold-backed stablecoins could potentially unlock value for millions of households in India, allowing them to earn returns on their idle gold.
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