“Every revolution ends up creating the very institutions it once rebelled against.”
- Based on the works of George Orwell
In 2008, Satoshi Nakamoto gave the world a peculiar gift: a financial system that promised to run on math instead of trust. No banks. No Governments. No middlemen. Just pure code executing immutable transactions in a ‘trustless’ ecosystem.
Now, ‘trustless’ is crypto-speak for a system where you don't need to rely on a central party to keep track of who owns what. Unlike traditional (financial or other) systems, which depend on a specific (central) entity to maintain records of balances and transactions, blockchain lets everyone verify everything themselves.
Seventeen years later, the world of cryptocurrencies looks a bit different. Many users now rely on ‘centralized’ crypto exchanges and custodial platforms to manage their private keys. Individuals are opting for centralization (relying on trusted 3rd parties) even when interacting with the decentralized blockchain for ease of use. We’ve built a trustless system so complex that most people don't trust themselves to use it.
Another big epiphany is that ‘trust’ needs structure and rules. It needs someone to say, ‘this is legitimate’ and ‘that is not’. It needs someone to explain why your jpeg (read, NFT) is worth $30 million (yes, 30, yes ‘million’, and no, this isn't the highest someone's paid for an NFT). It needs a regulator to manage increasing frauds and security breaches and punish the unscrupulous players. The trustless revolution is discovering that it needs exactly what it set out to eliminate: centralized regulations. In this edition of FinTales, we explore how a lack of these very regulations impact opportunities for the cryptocurrency industry.
Here is our FinTales menu for the month.
Main Course: a primer for businesses eyeing the stablecoin opportunity in India.
Dessert: sweet news about seamless KYC for NRIs.
Mints: a refresher on recent fintech developments.
Main Course 🍲
🪙 How stable is the Stablecoin Opportunity in India?
For years, the Indian Government has kept its distance from the crypto universe. The volatility, scams and uncertainty made the regulators uneasy. But something is changing.
It started in July 2025, when U.S. President Donald Trump signed the GENIUS Act, formally recognizing stablecoins. Unlike Bitcoin or Ethereum, stablecoins are pegged to traditional assets like the U.S. dollar or gold, giving them a predictable value. That single move set off ripples worldwide. Since then, countries that once frowned on crypto, including India and China, have started softening their stance.
Last month, India’s Finance Minister remarked that nations must ‘prepare to engage with stablecoins or risk exclusion’. Around the same time, AnchorX, backed by the Chinese government-supported blockchain Conflux, launched the world’s first yuan-backed stablecoin in Kazakhstan.
Much of the chatter has been about the geopolitical impact and digital currency races. But we want to explore another interesting question: what does this mean for businesses eyeing India’s stablecoin opportunity?
💸 A new kind of currency moment
At its core, a stablecoin is just digital money with the reliability of fiat currency and the efficiency of blockchain. Because blockchain-based transactions rely on fewer intermediaries, transactions settle instantly and costs are lower. This makes stablecoins especially powerful for cross-border payments – transactions notorious for high fees and long settlement timelines. Imagine sending money overseas and having it arrive in seconds instead of days.
It’s no surprise that big players are taking note. Ten global banks – including Citi, Deutsche Bank, and Goldman Sachs – recently announced plans to issue 1:1 reserve-backed digital tokens. Visa has also piloted cross-border settlements using USDC (a type of stablecoin), bringing settlement time down from days to under an hour.
For India, the timing couldn’t be better. The country receives the highest remittances in the world and already has the highest number of stablecoin holders (314 million). There’s a clear need but also a clear challenge: India doesn’t yet have rules for this space. And as history shows, a lack of regulation doesn’t mean a lack of regulatory action.
☁️ The regulation fog
When crypto businesses start offering financial services –moving money, making payments, or enabling investments – they start to behave a lot like banks, NBFCs or other regulated entities. That’s when regulators get uncomfortable. Globally, watchdogs have responded with what’s known as ‘regulation by enforcement’ – using existing laws to police new technologies. The U.S. SEC has done this aggressively, launching 125 enforcement actions against crypto players between 2021 and 2024, collecting over USD 6 billion in penalties.
While India hasn’t reached that stage yet, it could – especially if cryptocurrency activity scales up before we have a dedicated rulebook. Stablecoins face an even higher risk of regulation by enforcement because they are tethered to real-world assets like the dollar – making regulators view them as shadow versions of fiat currency. Any instability in this space could easily spill over into the traditional financial system.
🌐 Where it gets tricky: cross-border flows
The risk multiplies when stablecoin rails are used to offer tightly regulated services like cross-border payments. Take export payments, for example. India’s foreign exchange laws require that all such transactions pass through Authorised Dealer (AD) banks regulated by the RBI. These banks help the RBI track capital inflows, verify goods traded, and maintain balance of payments.
Now imagine a stablecoin-based transaction: a U.S. buyer pays in dollars to crypto-businesses → the amount is converted into stablecoins → the stablecoins are transferred via blockchain → and then converted to rupees for the Indian exporter. Quick and seamless – but the AD bank is missing. That means the RBI loses visibility. And when regulators can’t see, they act. So, for businesses seeking to operate in this regulatory void, careful structuring that earns regulatory trust becomes essential.
💡 The smart way forward
The right bet for businesses is to build like a licensee-in-waiting – cautious in structure, clear in governance, and ready to plug into regulation the day it arrives. Those that imbibe governance, transparency, and regulatory discipline early will be the ones best placed when the rules arrive. Some guiding principles:
1. Strong governance: Keep customer funds separate and secure. Strengthen cybersecurity and operational safeguards. Conduct external audits to identify and address gaps.
2. AML registration and compliance: Register with the Financial Intelligence Unit (FIU) and report suspicious activity.
3. Mirroring of existing rules: Follow the same rules as prescribed for parallel services in traditional finance. For instance, RBI allows resident individuals to freely remit up to USD 250,000 per financial year, for a wide range of transactions, without RBI approval. The stable-coin businesses offering remittances services may follow the same limits.
4. User diligence: Do your KYC thoroughly to ensure services are not misused for unlawful purposes.
5. Strong disclosures and clean records: Focus on strong customer disclosures. Maintain records of transaction chains, user KYC details, partner due-diligence records, accounts where funds are maintained, and sources to obtain and maintain stablecoin liquidity, etc.
Following these principles won’t just minimize regulatory risks - it could also help businesses create a genuine first-mover advantage. When India finally introduces a rulebook, regulators is more likely to collaborate with or authorize players which command confidence through their robust practices.
🍰 DESSERT
✈️ NRI KYC Minus the Jet Lag
For years, NRIs have faced a simple but frustrating hurdle – they can’t complete KYC remotely. Despite having Aadhaar cards, the system isn’t built for them. Aadhaar-based remote KYC depends on OTPs sent to Indian mobile numbers, which most NRIs don’t maintain abroad. SEBI’s KYC rules add another layer: remote verification must include geo-tagging to confirm the user is physically in India. Together, these rules mean that an NRI can complete KYC only when they’re in India – a limitation that has kept many out of the securities market.
That may soon change. The Department of Financial Services, along with the RBI, SEBI, IRDAI, and PFRDA, is working on a new KYC framework designed for remote access. SEBI has also proposed easing of the geo-tagging rule, allowing re-KYC and KYC updates to be done remotely. Meanwhile, the International Financial Services Centres Authority (IFSCA) in GIFT City is collaborating with UIDAI and RBI to build an online face-authentication system for NRIs. Some banks have even begun pilot programs to test remote KYC flows.
Piece by piece, the system is being reimagined. The goal: an integrated, tech-led KYC process that finally lets NRIs verify their identity from anywhere – without needing to step on a flight home.
☘️ MINTS
🔐 RBI rejigs the 2FA framework: The RBI has revised its digital payment authentication norms to enable more secure ways to verify transactions. This shift has been in the offing for almost a year, with RBI’s consistent call to reduce reliance on SMS-OTPs because they are vulnerable to phishing, SIM-swap attacks, network delays and delivery failures.
From April 2026, payment providers must use two independent authentication factors, with at least one being dynamic. Players like Razorpay, Navi and Visa, have already rolled out biometric-based authentication options using fingerprints or facial recognition for online payments. Head over to our deep dive on these directions here.
🥷 RBI’s tokenisation tales: RBI, in collaboration with a few banks, has launched a retail sandbox for its central bank digital currency (CBDC) to help fintechs build and test new solutions. This is a part of its retail CBDC pilot which began in December 2022 and now has about 7 million users. The central bank will also launch a pilot on certificate of deposit tokenisation which will allow digital representations of assets to be stored on a secure blockchain.
👮 PRB – a new sheriff in town: RBI has formed a six-member Payments Regulatory Board (PRB) to oversee and regulate the country’s payment systems. The board is chaired by the RBI Governor and includes other RBI leaders (the Deputy Governor and the Executive Director). It will also have three nominees from the Central Government, including representatives from the Department of Financial Services, the Ministry of Electronics & IT, and a renowned industry expert. The PRB replaces the earlier Board for Regulation and Supervision of Payment and Settlement Systems (BPSS), which functioned as a committee under the RBI’s Central Board. Check out our take on the PRB’s structure and government representation here.
💯 UPI gets an A+ in RBI’s half-yearly report card: According to the RBI’s June 2025 Payment System Report, India’s digital payments have grown 38 times in volume and over three times in value over the past decade. In the first half of 2025, UPI made up 85% of all transactions (but only 9% by value), while RTGS, NEFT, IMPS, and BBPS also saw strong growth. Card and credit networks are expanding, and credit on UPI, higher e-mandate limits, and offline payment options are aiming to deepen digital inclusion. The RBI is also addressing frictions due to pronounced delays in cross-border payments at the beneficiary stage.
👨💻 RBI becomes the “harbinger” of innovation: RBI has unveiled its hackathon ‘HaRBInger 2025’ themed ‘Secure Banking: Powered by Identity, Integrity and Inclusivity’. The hackathon will see participants tackle challenges along three problem statements: tokenised KYC (ensuring secure, reusable digital identity tokens to simplify onboarding and reduce fraud); offline CBDC (e₹) (enabling secure transactions without internet); and enhancing trust (detecting cyber fraud and improving grievance redressal).
🌐 UPI, everything, everywhere, all at once: NPCI is expanding UPI everywhere – across borders, devices and use cases.
Customers are now allowed to make cash withdrawals through UPI at Business Correspondent (BC) touch points using Micro ATMs. Earlier, cash withdrawals at these touch points were only possible through card and PIN. Now, a dynamic UPI QR code scan is enough for withdrawals.
New authentication options like face and fingerprint authentication have been added for UPI. Users can now verify transactions and set or reset their UPI PIN using on-device biometrics.
UPI has gone global once again with retail stores in Qatar now accepting UPI, propelling the NIPL’s goal of expansion to 20 countries by FY 2029.
NPCI has extended UPI Circle to IoT devices like smart glasses, watches, TVs, and AI profiles. Users can link these as trusted secondaries to make domestic P2M payments within a Rs 5,000 transaction and Rs 15,000 monthly limit.
NPCI has partnered with Razorpay and OpenAI to test AI-driven payments through ChatGPT using UPI. The pilot aims to test how AI can autonomously complete secure transactions for users in a simple and controlled way.
💱 Forex on fast forward: At GFF 2025, Nirmala Sitharaman unveiled a real-time foreign currency settlement system at GIFT City. Transactions in foreign currencies by entities in GIFT-IFSC are currently settled through multiple correspondent banks and nostro accounts, often taking 36 to 48 hours to settle. The new system allows direct and instant settlement within IFSC.
On the retail end, forex is going digital, with Bharat Connect being integrated into apps like CRED and MobiKwik. Using these services, Users can now buy USD as currency notes, load forex cards or make outward remittances, at competitive prices.
❌ Regulators tighten the screws on fraud: India’s digital use is surging, but so are cyber threats. Over 86% of households are now online, and cyber incidents have more than doubled since 2022. In response, the Government has consistently blocked fake SIMs and IMEIs, expanded the dedicated cybersecurity assistance helpline, and strengthened coordination across agencies. As part of these efforts, the DoT and FIU-Ind have also signed an MoU to make telecom fraud detection faster and improve data sharing.
At the same time, SBI and Bank of Baroda are setting up an entity to design and manage a digital payments intelligence platform. This platform will detect and prevent fraudulent transactions across banks using real-time data. All 12 state-run banks are expected to pick up equity stake in this entity.
🏦 Crypto in the global spotlight: The European Commission is considering moving crypto supervision from national regulators to the European Securities and Markets Authority to ensure consistent enforcement of its crypto rules. This comes amid growing calls for tighter oversight, with the Bank of France’s Governor urging stricter stablecoin rules to prevent companies from exploiting gaps between EU and non-EU jurisdictions.
Meanwhile in India, the Madras HC has recently recognised cryptocurrency as a form of property. The ruling filed by a WazirX user whose crypto tokens were frozen by the exchange following a hack. The user argued that her holdings were her private property and that WazirX had no authority to freeze, mix, or redistribute them as part of its loss-recovery process. WazirX contended that the dispute should be referred to arbitration in Singapore as per user agreement and that the account freeze was a security measure. Ruling in the investor’s favour, the court directed WazirX to furnish a bank guarantee of ₹9.56 lakh or deposit the equivalent amount in escrow until the arbitration concludes.
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That’s it from us. We’d love to hear from you. Write to us at contact@ikigailaw.com.
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