India Prepares ARC Token to Cut USD Stablecoins Reliance

• ARC aims to keep digital liquidity domestic by tying rupee tokens to sovereign assets.
• RBI-linked ARC limits issuance to businesses to limit outflows to dollar stablecoins.
• Private-sector modes enable programmable settlement while preserving RBI oversight.

India is set to launch its Asset Reserve Certificate (ARC), a rupee-backed stablecoin aimed at reducing domestic dependence on dollar-backed digital assets. Developed by Polygon and India-based fintech Anq, the project targets a Q1 2026 release. Each ARC token will maintain a 1:1 value with the Indian rupee and be fully backed by cash, fixed deposits, or government securities.

Sovereign Digital Liquidity and Domestic Control

The ARC stablecoin shows India’s effort to maintain sovereign control over digital liquidity while keeping transactions within domestic boundaries. Unlike global retail stablecoins, ARC will be limited to corporate accounts and integrated into the Reserve Bank of India’s (RBI) Central Bank Digital Currency (CBDC) infrastructure. 

This two-tier system positions the RBI as the ultimate settlement layer while the private sector facilitates innovation in programmable payments and remittance systems. Each token will be minted only after acquiring cash equivalents, ensuring transparency, safety, and compliance. 

The approach prevents capital outflows to dollar-backed stablecoins while simultaneously promoting domestic demand for government debt instruments. By aligning with rupee partial convertibility rules, ARC allows business transactions without granting full capital account access, maintaining economic stability.

ARC’s ecosystem will employ Uniswap v4 protocol hooks to restrict token swaps to whitelisted addresses, ensuring regulatory compliance. Standard Chartered recently warned emerging markets could lose up to $1 trillion in deposits over three years due to dollar-backed stablecoins. India’s introduction of a sovereign-backed stablecoin is an early measure to protect domestic liquidity and tighten financial oversight.

Complementing RBI’s Digital Currency

The ARC project complements India’s CBDC by creating a regulated interaction layer managed by the private sector. This framework allows banks and businesses to execute faster, programmable transactions without bypassing central oversight. 

The private platform will integrate with RBI-led infrastructure, creating a controlled, compliant digital payment system. Only business accounts will be authorized to mint ARC tokens, supporting adherence to the Liberalised Remittance Scheme (LRS) for foreign exchange.

India ensures that the stablecoin supports corporate liquidity rather than individual speculative behavior by restricting retail activity. The model focuses on strong compliance while still keeping the advantages of blockchain, like easy tracking, real-time settlement, and automated checks.

The ARC setup fixes issues seen with foreign stablecoins that usually pull liquidity outside the country. By linking the tokens directly to India’s government debt, it helps protect the country’s monetary control and reduces dependence on unstable global stablecoins. It also makes settlement faster across different sectors, cutting down the delays that normally happen with traditional bank processes.

Related: India’s Madras HC Upholds XRP as Digital Property in Law

Global Implications and Digital Finance Leadership

India’s stablecoin launch could influence the broader digital finance sector in Asia and emerging markets. By keeping liquidity local and integrating with programmable settlement modes, the project shows a change toward state-backed digital instruments over private dollar-denominated stablecoins.

Industry experts note that a successful ARC system may establish India as a benchmark for combining private blockchain innovation with government oversight. The platform’s design may encourage collaborations between Indian fintech firms and international blockchain developers while expanding predictable, compliant digital payment infrastructure.

The project also aligns with India’s goal to modernize financial operations, offering real-time transaction finality, lower operational friction, and transparent settlement tracking. As businesses prepare for wider adoption, the ARC system ensures secure, efficient, and regulated digital payments without exposing domestic liquidity to foreign markets.

Meanwhile, India’s ARC stablecoin is a strategic means for the country to protect its financial independence while improving digital payment tools for businesses. By connecting it to the CBDC and backing it with government assets, the system focuses on safety, compliance, and keeping liquidity within the country. This model could guide other nations looking for regulated stablecoin options.