Nikhil Kamath recently advocated for a gold-backed stablecoin that could help monetize idle gold in Indian households, generating returns for investors. However, Ashish Singhal, Co-founder of CoinSwitch, responded that such products already exist globally, noting that gold-backed stablecoins like PAXG and XAUT represent a multi-billion dollar market. According to reports from Mint, Singhal emphasized that while the idea is directionally correct, making it work at India's scale is much more complex than it appears. The discussion has drawn attention to the potential of gold-backed crypto stablecoins in India through a detailed exchange on X, with Kamath describing a strong focus on dollar-backed stablecoins as potentially bad long-term for the country. Edul Patel of Saber Money has now reopened the debate after releasing a stablecoin strategy report at a Bangkok event in 2026, describing it as an "operator's blueprint" based on real-world mistakes and market experience.
Gold prices have skyrocketed in major Indian cities, with gold prices once deemed unlikely to hit ₹70,000 for 10 grams now surpassing this threshold. As reported by Devdiscourse, this dramatic price appreciation is driven by central bank purchases, currency depreciation, and geopolitical instability that have shifted consumer behavior. The surge presents significant opportunities for borrowing against gold assets rather than traditional loans, creating new financial pathways for households with gold holdings. This price movement adds urgency to discussions about gold monetization, as the ₹2.4 lakh crore reserve becomes increasingly valuable in the current market environment. The fragmented nature of India's gold structure, consisting of 25,000 tonnes in jewelry, family heirlooms, and household holdings, makes pooling and formalization more challenging but also more economically attractive given current price levels.
According to Mint reports, there are significant regulatory and trust issues surrounding gold monetization. Gold doesn't naturally generate income, so any returns typically come from lending it out or financial structuring, which adds risk through intermediaries. Singhal highlighted a second key constraint - gold is traditionally a non-yielding asset, and any yield on a gold-backed stablecoin would require financial intermediation through lending, structured products, or platform incentives, introducing new layers of counterparty risk. The challenge is not the idea itself, but the practical implementation given India's unique gold ownership structure and the need for international standards for stablecoin adoption. Patel's report points to key operational challenges, including liquidity shortages, compliance requirements, and unstable banking partnerships, noting that many operators misjudge liquidity needs during large transactions and off-peak settlement hours. The regulatory review warns that stablecoins move across borders but regulation remains national or regional, creating risks for the future internet as issuers can locate in looser jurisdictions while serving global users, potentially undermining interoperability and trust in internet-based financial platforms.
A successful gold-backed crypto stablecoin model could help India reduce its annual gold imports, ease current account pressures, bring idle household wealth into the formal financial system, and support de-dollarization goals. It could also create fresh opportunities for yield generation and financial inclusion through decentralized finance. However, Singhal emphasized that custody, standardization, and trust layers remain the bigger challenges. The discussion arrives as tokenized real world assets continue to attract global attention, with the exchange offering balanced and practical insights for regulators, crypto platforms, investors, and policymakers evaluating gold tokenization in the Indian market. Patel's report acknowledges that Asia runs some of the world's most efficient domestic payment systems, including UPI in India, PayNow in Singapore, and InstaPay in the Philippines, but cross-border transfers remain painfully slow and costly. "Not because of technology, but because no one owns the full flow," Patel noted, emphasizing the need for domestic payment systems before global standards fully form. The regulatory review stresses that stablecoins should be integrated into macroprudential supervision since they are increasingly linked to DeFi protocols, banks, exchanges, payment systems and tokenized assets, with regulators needing early-warning tools for peg instability, reserve stress, liquidity flows, DeFi exposures, and interconnections with traditional finance.
