Zerodha co-founder Nikhil Kamath has raised concerns over the growing push for dollar-backed stablecoins in India, saying such instruments may not suit the country’s long-term financial interests. Kamath instead suggested that India could explore a gold-linked stablecoin model that may help unlock value from the massive quantity of idle gold held by households across the country.
Praising UPI as a transformational success, in a LinkedIn post, Kamath also credited Indian regulators and the Modi government for taking a cautious approach toward dollar-backed digital assets despite increasing global adoption.
Kamath argued that while stablecoins pegged to the US dollar are gaining popularity globally for cross-border payments and digital transactions, they could gradually strengthen the dominance of the dollar in emerging economies like India.
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Nikhil Kamath suggests a gold-based stablecoin as a potential alternative to dollar-backed cryptocurrencies, believing it could help unlock value from the large quantity of idle gold held by Indian households and avoid increasing dominance of the US dollar in emerging economies.
Kamath’s primary concern is that dollar-backed stablecoins could gradually strengthen the dominance of the US dollar in emerging economies like India, potentially reducing monetary autonomy.
A gold-based stablecoin could potentially monetize the unutilized gold holdings in Indian households, allowing them to earn a yield on the precious metal stored in lockers and homes.
PM Modi urged citizens to reduce gold purchases to help conserve foreign exchange reserves, as high gold imports contribute significantly to India’s trade deficit and put pressure on the rupee.
Following PM Modi’s appeal to curb gold purchases, shares of Indian jewellery retailers experienced a sharp selloff, with several major stocks declining significantly.
“UPI has been incredible for India to say the least,” Kamath said.
He added, “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.”
The investor also credited policymakers for resisting the push toward such instruments.
“Credit where it’s due, to Modi govt and Indian regulators, you probably got this one right in the face of a lot of pressure,” Kamath said.
The comments come at a time when several countries, fintech firms and crypto companies are increasingly exploring stablecoins as a cheaper and faster alternative to traditional payment systems. Stablecoins are cryptocurrencies typically linked to fiat currencies such as the US dollar to reduce volatility and enable smoother digital transactions.
However, Kamath’s remarks reflect growing concerns among some economists and policymakers globally that widespread adoption of dollar-linked digital assets could indirectly increase dependence on the US financial system and reduce monetary autonomy in developing economies.
Can India unlock trillions through gold-backed digital assets?
Instead of relying on dollar-backed tokens, Kamath floated the idea of a gold-based stablecoin designed specifically around India’s unique economic and cultural landscape.
India is one of the world’s largest consumers and holders of gold, with households estimated to own thousands of tonnes of the precious metal. Much of this gold, however, remains idle in lockers and homes, generating little or no financial return.
Kamath suggested that blockchain technology could potentially help monetise these dormant gold holdings through a gold-linked digital token.
“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, don’t know enough to talk about this, but thoughts?” he said.
While Kamath admitted he is not an expert on the subject, the idea has sparked wider discussion about whether future digital financial products could eventually be backed by real-world assets such as gold instead of fiat currencies.
Such a model could theoretically combine the stability of gold with the efficiency of blockchain-based finance.
India has so far maintained a guarded approach toward private cryptocurrencies. The government and the Reserve Bank of India have repeatedly highlighted concerns around financial stability, capital flows and investor protection linked to unregulated digital assets.
At the same time, India has aggressively pushed its own digital public infrastructure initiatives. UPI has emerged as one of the world’s largest real-time payment systems, while the RBI continues to pilot the digital rupee as part of its central bank digital currency (CBDC) programme.
Kamath’s remarks now add a fresh layer to the debate — whether India’s digital currency future should be tied to the US dollar, sovereign-backed digital rupees, or potentially even gold-backed blockchain assets rooted in India’s traditional savings culture.
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