Nations Must Prepare to Deal with Stablecoins: Finance Minister

Current Context:

Union Finance Minister Nirmala Sitharaman, speaking at the Kautilya Economic Conclave 2025, highlighted the transformative role of stablecoins in reshaping money and capital flows. She cautioned that countries must be ready to adapt to new monetary architectures or risk being excluded from the evolving global financial system.

What are Stablecoins?

• A type of cryptocurrency designed to maintain a stable value, pegged to underlying assets such as fiat currencies (USD, INR, etc.), a basket of currencies, or commodities like gold.
  
  
• Aim to combine the efficiency of crypto transactions with reduced volatility compared to traditional cryptocurrencies like Bitcoin.
  
  

Types of Stablecoins

1.    Fiat-backed stablecoins

○     Pegged 1:1 to a fiat currency (e.g., USD Coin (USDC), Tether (USDT)).

○     Backed by bank reserves or cash-equivalent assets.

2.    Crypto-backed stablecoins

○     Pegged against another cryptocurrency, but over-collateralized to absorb volatility.

○     Example: DAI (pegged to USD but backed by Ethereum and other cryptos).

3.    Algorithmic stablecoins

○     Not backed by any asset, but maintain stability using algorithms and smart contracts that expand or contract supply.

○     Example: TerraUSD (collapsed in 2022 – shows risks).

4.    Commodity-backed stablecoins

○     Pegged to commodities like gold, oil, or precious metals.

○     Example: Paxos Gold (PAXG).

Advantages

●     Price Stability: Unlike Bitcoin, they remain steady in value.

●     Cross-border Payments: Faster, cheaper than traditional banking systems (SWIFT).

●     Financial Inclusion: Useful in countries with weak currencies or unstable banking.

●     Smart Contracts: Enable use in decentralised finance (DeFi) applications.

Risks & Challenges

●     Regulatory Vacuum: Issued privately, lacks clear legal status in most countries.

●     Systemic Risk: If reserves are not transparent, they can collapse (e.g., Terra crash).

●     Monetary Sovereignty Issues: Can undermine central banks’ control over currency and capital flows.

●     Cybersecurity & Fraud: Prone to hacking and money laundering.

Key Points from FM’s Remarks

• Global Shift: Innovations like stablecoins represent systemic changes that no nation can ignore.
  
  
• Adaptation vs. Exclusion: Countries face a binary choice – adapt to digital money trends or risk being sidelined.
  
  
• India’s Economic Resilience: India remains strong in absorbing external shocks while navigating new challenges of wars, strategic rivalries, and global financial shifts.
  
  

Policy Context

• RBI’s Position: The Reserve Bank of India has consistently opposed private cryptocurrencies, advocating for a ban while simultaneously piloting India’s Central Bank Digital Currency (CBDC).
  
  
• CBDC vs. Stablecoins:
  
  
  • CBDC → Issued by central banks, legally recognised as sovereign currency.
    
    
  • Stablecoins → Privately issued, lack legal recognition but gaining traction globally.
    
    
• Current Status in India: Private cryptocurrencies are not legal tender; however, the government taxes crypto transactions, signalling a cautious engagement.
  
  

Significance

• For India: Raises policy questions about balancing innovation with financial stability.
  
  
• For the World: Stablecoins may challenge traditional monetary sovereignty, forcing central banks to rethink global finance.
  
  

Renewed Call for Retrieval of Katchatheevu

 

 

Current Context

• Tamil Nadu CM M.K. Stalin (Oct 2025) reiterated that retrieving Katchatheevu from Sri Lanka is the only permanent solution to the recurring problem of arrests of Tamil Nadu fishermen by the Sri Lankan Navy , Confiscation of boats & equipment.

Katchatheevu Island – Background

• A small, uninhabited islet (~285 acres) in the Palk Strait, located between Tamil Nadu (India) and Sri Lanka.
  
  
• Historically part of the Ramanathapuram Zamindari Estate (Madras Presidency, British India).
  
  
• After independence → became disputed territory between India & Sri Lanka.
  
  

The 1974 & 1976 Agreements

• 1974 Indo–Sri Lanka Maritime Agreement:
  
  
  • India ceded Katchatheevu to Sri Lanka for clear maritime boundaries.
    
    
  • Indian fishermen allowed traditional rights → drying nets, resting and attending the St. Anthony’s Church festival.
    
    
• 1976 Agreement:
  
  
  • Barred Indian fishermen from fishing in Sri Lankan waters, including Katchatheevu.
    
    
  • Led to recurring arrests and tensions.
    
    

Why is it controversial ?

• Tamil Nadu’s Stand:
  
  
  • Agreements were made without consulting the State (violation of federal spirit).
    
    
  • Fishermen’s livelihoods were compromised.
    
    
  • Demands retrieval through diplomatic means.
    
    
• Union Govt’s Stand:
  
  
  • Katchatheevu was ceded lawfully.
    
    
  • Retrieval is legally and diplomatically impractical.
    
    
  • Instead, focus on bilateral mechanisms with Sri Lanka to prevent arrests.
    
    
• Sri Lanka’s Stand:
  
  
  • Considers Katchatheevu as sovereign territory.
    
    
  • Strongly opposes any Indian claim.
    
    

Legal & Constitutional Angle

• Article 297: Union controls maritime territory.
  
  
• SC in Berubari Case (1960): Any ceding of territory requires a Constitutional Amendment (Art. 368).
  
  
• Contention: No amendment was made when India ceded Katchatheevu → leading to continuing disputes in court.
  
  

Way Forward / Solutions Discussed

• Joint Fishing Zones in Palk Bay.
  
  
• Deep-sea fishing schemes for Tamil Nadu fishermen to reduce dependence on Sri Lankan waters.
  
  
• Diplomatic dialogue via Joint Working Groups (India–Sri Lanka).
  
  
• Possible lease-back model (like Hong Kong under UK–China).
  
  

Poland Joins NATO Fuel Pipeline Network

Current Context

• Poland has announced it will formally join the NATO Pipeline System (NPS), 25 years after becoming a NATO member.
  
  
• The project involves building a 300-km pipeline from Germany to Bydgoszcz, funded with €4.7 billion, to directly integrate Poland into NATO’s 10,000 km-long European fuel supply network.
  
  
• The move comes amid Russia’s invasion of Ukraine, rising tensions with Belarus, and concerns over NATO’s eastern flank vulnerabilities.
  
  

Background

• NATO Pipeline System (NPS):
  
  
  • Established during the Cold War to ensure uninterrupted fuel supply (aviation fuel, diesel, lubricants) to NATO forces across Europe.
    
    
  • It comprises multiple interconnected pipelines, storage depots, and distribution hubs.
    
    
  • Operates under the NATO Support and Procurement Agency (NSPA).
    
    

• Poland’s Position:
  
  
  • During the Cold War, Poland was part of the Warsaw Pact, hence excluded from NATO logistics.
    
    
  • Since joining NATO in 1999, Poland has been lobbying for greater infrastructure integration into NATO networks, especially after Russia’s annexation of Crimea (2014) and the Ukraine invasion (2022).
    
    

Why This Matters

1. Strategic Security Implications
   
   
   1. Strengthens NATO’s eastern logistics corridor, ensuring faster supply of fuel to tanks, fighter aircraft, and armored vehicles.
      
      
   1. Reduces dependency on vulnerable supply chains (road/rail convoys) that could be disrupted during conflict.
      
      
   1. Enhances NATO’s capacity to conduct sustained military operations near Russia and Belarus borders.
      
      
2. Geopolitical Significance
   
   
   1. Poland becomes a frontline NATO state, cementing its role in European defense.
      
      
   1. Sends a strong message of Western unity against Russia’s aggression.
      
      
   1. Likely to draw sharp criticism from Moscow, which sees NATO infrastructure expansion as a threat to its security.
      
      
3. Economic and Military Investment
   
   
   1. At €4.7 billion, this is one of Poland’s largest defense infrastructure projects in 30 years.
      
      
   1. Boosts energy resilience by diversifying supply sources during wartime scenarios.
      
      
   1. Strengthens Poland’s defense-industrial profile and its ability to act as a logistics hub for NATO operations.
      
      
4. Implications for NATO’s Eastern Flank
   
   
   1. Poland hosts key NATO facilities, including the Joint Force Training Centre in Bydgoszcz and rotational U.S. troops.
      
      
   1. With pipeline integration, NATO can now pre-position supplies in Poland, allowing quicker mobilization in case of escalation.
      
      
   1. Contributes to NATO’s deterrence posture by demonstrating readiness and capability.
      
      

CAQM Calls for Action Against Officials on Stubble Burning

Current Context

• With the onset of the paddy harvest season, the Commission for Air Quality Management (CAQM) has issued a new directive (Oct 1, 2025) empowering district heads in Punjab, Haryana, Rajasthan, Uttar Pradesh, and Delhi to hold officials accountable for negligence in tackling stubble burning.
  
  
• District Collectors, Magistrates, and Deputy Commissioners can now directly file complaints before judicial magistrates against erring nodal and supervisory officers.
  
  

Background

• Stubble Burning: Farmers set fire to leftover paddy straw to clear fields for the sowing of wheat, as mechanized removal is costly and time-consuming.
  
  
• Impact on Delhi-NCR: Burning peaks in October–November, coinciding with low wind speeds and temperature inversion, trapping pollutants → severe smog episodes.
  
  
• Judicial Push: The Supreme Court has repeatedly directed authorities to adopt a tougher stance, citing health and environmental costs.
  
  
• Past Measures:
  
  
  • Crop residue management (CRM) scheme subsidies for Happy Seeder, balers, super straw management systems.
    
    
  • Bio-decomposer pilot projects (like PUSA decomposer in Delhi).
    
    
  • Earlier CAQM orders (2023–24) also warned of strict action but compliance remained weak.
    
    

Key Provisions of the New CAQM Directive

1. Direct Accountability → Officials including SHOs, nodal officers, and field-level enforcers can face legal action if found negligent.
   
   
2. Legal Empowerment → District heads authorized to move court without waiting for higher approvals.
   
   
3. Strict Vigil → Round-the-clock monitoring of hotspots in Punjab, Haryana, and western U.P. through satellite and ground-level inspections.
   
   
4. Performance Review → State governments expected to regularly review compliance and report progress to CAQM.
   
   

Data Insights (IARI 2025)

• Punjab has reported 95 stubble burning incidents so far, compared to 179 in the same period last year → lowest in 6 years.
  
  
• Haryana and U.P. continue to report incidents but at a smaller scale compared to Punjab.
  
  
• Contribution to Delhi’s pollution: Punjab (~40–45%), Haryana (~25–30%), U.P. (~20%).
  
  

Challenges in Implementation

• Farmers argue the high cost of residue management machines despite subsidies.
  
  
• Small landholding size makes mechanized options less feasible.
  
  
• Lack of market linkages for straw-based industries (bio-CNG, cardboard, biomass power).
  
  
• Enforcement often targets farmers, not systemic issues like procurement policies.