Indian Rupee-based ARC stablecoin set to launch in 2026

The Asset Reserve Certificate (ARC) is India’s first planned sovereign-backed stablecoin – a digital token pegged 1:1 to the Indian rupee and fully collateralized by Indian government debt. Developed by blockchain scaling firm Polygon Labs (co-founded by Sandeep Nailwal) and Indian fintech startup Anq Finance, ARC is designed as a regulated, non-speculative cryptocurrency that strengthens the rupee rather than challenging it. Each ARC token will represent an equivalent value of government securities (G-Secs or treasury bills) held in reserve. In other words, every ARC issued is backed one-to-one by sovereign assets, ensuring its value remains stable and transparent. By tying the stablecoin to government bonds, India aims to keep liquidity onshore and deepen its debt markets.

A stablecoin is a type of cryptocurrency whose price is fixed (or “pegged”) to a real-world asset like a fiat currency, so it resists the wild swings seen in assets like Bitcoin. ARC will work alongside India’s central bank digital currency (CBDC) to provide a faster, programmable payment layer. In a proposed “twin-rupee” model, the RBI’s digital rupee would serve as the official settlement asset under the central bank’s control, while ARC (issued by regulated private entities) would be used for low-cost, on-chain transactions and remittances. This split lets users benefit from blockchain innovations (like smart contracts and instant global transfers) while the Reserve Bank of India (RBI) retains ultimate control over the monetary base.

Who is Behind ARC?

The ARC project is a collaboration between Polygon, an Ethereum scaling network, and Anq Finance, a domestic fintech firm with expertise in tokenization and MSME (small business) financing. Polygon brings global blockchain infrastructure experience (it already powers tokenization projects for BlackRock, JPMorgan, etc.), while Anq provides local regulatory know-how. Polygon co-founder Sandeep Nailwal has publicly said he is “fully confident” India will launch an INR-backed stablecoin soon. By combining Polygon’s technology with Anq’s understanding of Indian laws, the team hopes to meet RBI guidelines and build trust among users.

Notably, ARC is being positioned as a regulated digital asset. Sources describe it as a “regulated, non-speculative” token that operates entirely within India’s financial system. Unlike dollar-pegged stablecoins (USDT, USDC), which are issued by private companies abroad, ARC’s redemption funds and collateral remain in India. In effect, the government-backed design means public oversight and auditable reserves will ensure ARC’s stability and compliance with Indian currency laws.

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India is moving toward a digital rupee economy. Polygon rails can support it.

Check out our Head of Payments @0xAishwary's take on how a tokenized rupee, INR stablecoins, and the e₹ (India’s digital rupee) can work together to benefit the Indian economy, from domestic… pic.twitter.com/HwIvuTLWME

— Polygon | POL (@0xPolygon) November 13, 2025

How ARC Works: Backing, Tech, and Regulation

Technically, ARC will be a token on the Polygon blockchain (an Ethereum Layer-2 network). Operating on Polygon means transactions are fast and low-cost, making ARC practical for everyday payments and remittances. When ARC launches (expected in early 2026), authorized issuers will mint new coins only after purchasing an equal amount of government bonds. Those bonds are locked in reserve, and a private key (via smart contracts) backs each ARC token. If a user redeems an ARC, the process reverses: the issuer hands back the underlying rupee (or equivalent) when burning the token. This 1:1 collateral model keeps ARC’s price tied to the rupee at all times.

Importantly, ARC must comply with India’s foreign-exchange and KYC/AML rules. Only business or licensed accounts will be able to mint or redeem ARC, and Polygon’s upcoming Uniswap v4 technology will help ensure tokens only change hands among approved parties. In practice, this means ARC transfers will include programmable restrictions so that rupee outflows are controlled. All transfers will run on public blockchain infrastructure, but with permissioned access enforced by the issuing entities, blending crypto innovation with regulatory oversight.

The planned design treats ARC as a second-tier payment layer. Under the RBI’s vision, the digital rupee (CBDC) remains the official money, used for settlement and as legal tender. ARC sits on top of that, giving businesses and consumers a way to transact on blockchains quickly. In effect, ARC is a tokenised claim on sovereign debt, not on RBI cash. This means it could even carry an implicit interest (from the bonds) that a pure fiat stablecoin would not – although initial plans emphasize one-to-one peg and stability above yield.

Why ARC Matters for India

ARC’s purpose goes beyond convenience. By creating a rupee-pegged digital asset backed by local bonds, India aims to plug a key gap in its financial ecosystem. Many analysts note that Indian remittances and crypto traders currently use US dollar stablecoins (like USDT) as a workaround for quick transfers, which drains Indian rupees abroad. ARC is intended to stem that outflow of liquidity. Every time an ARC is issued, it requires buying Indian government securities, which strengthens demand for domestic debt and supports the rupee’s value. Advocates argue this could lower India’s borrowing costs over time and create a virtuous cycle of public funding.

For individuals and businesses, ARC could make digital payments and cross-border transfers cheaper and faster. Because ARC transactions clear on-chain, transfers (even international) could settle in seconds with minimal fees, versus days via banks or high costs via Western stablecoins. This may especially benefit migrant workers sending remittances home and small merchants accepting payments. In short, ARC aims to bridge India’s traditional finance and Web3 worlds. It builds on India’s track record with UPI (real-time payments) by essentially digitising the underlying money rather than just the payment instructions.

An ARC token could also serve as financial infrastructure: for example, programmable automatic payments (through smart contracts) could simplify taxes, payroll, or subsidies. The project’s backers see it as a step toward financial inclusion and innovation. In global terms, a rupee stablecoin could even support cross-border trade in rupees, reducing dependence on the US dollar for transactions with partners (e.g., neighboring countries). In this way, ARC could extend India’s monetary influence abroad by offering a digital-rupee clearing mechanism for other economies.

How ARC Stays Stable: The Backing Breakdown

At heart, ARC is an ERC-20 token on Polygon’s zkEVM chain, prioritizing privacy and speed. But the magic is in the reserves: issuers must lock up equal INR assets before minting, ensuring you can always redeem for cash. No funny business like over-collateralization gambles seen in past stablecoin scares.

Transparency rules the day with on-chain oracles and third-party audits, echoing Circle’s USDC playbook. Minting? Whitelisted businesses only, burning tokens for fiat payouts in 24-48 hours. Stress tests late last year handled $500 million in simulated volume without a wobble—impressive for a newbie.

To visualize the diversified backing, here’s a snapshot of the estimated portfolio mix, based on project outlines:

Asset Type	Description	Estimated Proportion	Why It Fits
Cash Balances	Held in RBI-approved banks for quick access	20-30%	Instant liquidity, insured up to limits for user peace of mind
Fixed Deposits	Short-term bank yields at 6-7% annually	30-40%	Steady returns with maturity ladders to match token flows
Government Securities	Long-term G-Secs (5-10 years) for solid backing	40-50%	Sovereign safety net—low risk, high trust
Treasury Bills	91-364 day discounts for flexibility	10-20%	Easy rollovers, perfect for volatile demand spikes

This setup doesn’t just stabilize prices; it funnels demand toward Indian debt markets, potentially shaving 10-20 basis points off government borrowing costs. Analysts at Standard Chartered note it could claw back $2-3 billion in annual outflows from dollar stables. For more on stablecoin mechanics, check out this primer from CoinDesk.

Comparison with Other INR Stablecoins

India already has private stablecoins pegged to the rupee, but none with official backing. The most notable is TrueINR (TINR), introduced in 2020. TrueINR is a 1:1 INR stablecoin issued by a private firm (part of the WazirX exchange ecosystem). Each TrueINR is supposed to be backed by an equivalent rupee held in bank trust accounts, with audits announced periodically. It runs on multiple blockchains (Ethereum’s ERC-20, Binance’s BEP-20, Tron’s TRC-20).

However, TrueINR is a conventional fiat-backed stablecoin without any government link. Private trustees, not RBI oversight, handle its redemption and collateral. Usage has been limited to crypto markets and niche remittances. In contrast, ARC differs in key ways (see table):

Feature	ARC (proposed)	TrueINR (live)
Backing	Indian government bonds (each ARC = ₹1 of G-Secs/T-bills)	1 Indian rupee held in commercial bank accounts
Issuers	Polygon & Anq (regulated entities, under RBI framework)	Private fintech company (no RBI involvement)
Blockchain	Polygon network (Ethereum Layer-2)	Ethereum, Binance Smart Chain, Tron
Regulation	Designed as a regulated digital asset complementing RBI’s CBDC	Unregulated stablecoin (audited reserves)
Status/Timeline	Expected launch Q1 2026	Live since 2020

Unlike TrueINR and other tokenized rupees, ARC would be anchored to India’s official monetary framework. This makes it fundamentally different from dollar-based or private stablecoins – it is not just pegged to the rupee, it is backed by actual Indian government debt, keeping the economic benefit onshore.

Concerns and the Road Ahead

Despite its promise, ARC faces several challenges. One concern is decentralization vs control. Some crypto purists worry ARC may end up being fully centralized and permissioned, since only approved entities can issue or redeem it. In fact, critics note that labeling ARC as “sovereign-backed” may be marketing – the token could ultimately function much like a digital rupee, controlled by regulators. This centralization clashes with the open ethos of many cryptocurrencies.

Capital controls are another issue. India’s foreign-exchange laws prohibit using the rupee freely abroad, so ARC must strictly enforce geofencing. Early reports say ARC will abide by “partial convertibility” rules: the rupee can’t be used for unrestricted investment overseas. In practice, ARC platforms may need sophisticated tech (like whitelisted wallets or smart contracts) to block transfers that violate RBI/FEMA regulations. This could limit ARC’s appeal for international users and add friction to cross-border usage.

There are also market risks. Because ARC is backed by bonds rather than cash, its stability depends on interest rates and bond liquidity. In times of rising rates, bond prices fall – theoretically, this could make it hard to maintain a strict 1:1 peg. Redemption could become costly if many users cash out at once. Issuers will need robust risk management to honor conversions even during volatile markets.

Regulatory timing is another unknown. The RBI has historically been cautious about private stablecoins and crypto. Officials have emphasized promoting the CBDC over other digital currencies. Any rollout of ARC will require clear policy and approvals. As of late 2025, India’s government and regulators were still discussing how to handle crypto assets. Reports suggest ARC is likely to be introduced in early 2026, but delays are possible while the legal framework (and issuance mechanisms) are finalized.

Navigating the Rules: India’s Crypto Tightrope

Post-2020 Supreme Court win, crypto’s legal but unregulated—perfect for innovation, perilous for laundering risks (India’s FATF gray-list neighbor). ARC’s two-tier vibe—private mints under RBI watch—mirrors Japan’s yen models, with SEBI eyeing securities tags. Hot buttons: diaspora access for 18 million NRIs, KYC ironclad for redemptions, and classifying tokens as payments or debt.

RBI consultations push “sandbox-plus,” testing in pens before pens run dry. Cross-party backing tags it “Digital India” fuel, but bankers cry fragmentation. For the latest on India’s stance, peek at RBI’s CBDC page or SEBI’s fintech sandbox.

Wrapping Up: A Cautious Step Forward

ARC isn’t crypto’s messiah—it’s a measured bet on blending blockchains with Bharat’s banking backbone. By Q1 2026, we might see pilots humming, remittances rerouted, and rupees reigning digital. Success? It’ll demand user education, inclusive access, and rules that empathize with innovators and everyday folks alike. As India eyes multipolar finance, ARC could blueprint for the Global South: sovereign, scalable, sensible.

In summary, ARC represents a bold experiment in India’s fintech evolution. It could plug dollar-denominated drains, lower remittance costs, and spur new digital services on a rupee platform. But success depends on careful implementation: the tokens must be fully backed and transparent, and the system must balance innovation with strict compliance. If India manages that, ARC could be a model of sovereign-stablecoin design – blending blockchain speed with national currency stability.

Frequently Asked Questions (FAQs) about India’s rupee-backed ARC stablecoin