Key Highlights
- ARC will be a fully backed, rupee-pegged digital asset designed to prevent liquidity from moving into foreign dollar stablecoins.
- Works alongside the RBI’s CBDC, enabling programmable payments, regulated smart-contract systems, and enterprise-grade settlement.
- Controlled minting and whitelisted trading ensure compliance with India’s financial rules while supporting domestic fintech innovation.
India is moving closer to launching a fully collateralized digital asset known as the Asset Reserve Certificate (ARC), with a tentative rollout expected in the first quarter of 2026.
The project, developed jointly by Ethereum scaling heavyweight Polygon and India-based fintech firm Anq, represents one of the country’s most ambitious attempts to safeguard domestic liquidity while supporting regulated innovation in digital payments.
A Rupee-Pegged, Fully Backed Digital Asset
According to sources familiar with the discussions, the ARC token will be pegged 1:1 to the Indian rupee and minted only when issuers bring in cash or cash equivalents such as fixed deposits, government securities, or verified cash balances.
This design, they said, ensures transparency and prevents the kind of opaque reserve management controversies that have surrounded some foreign stablecoins.
The idea is straightforward but deeply strategic: create a digital asset that behaves like a stablecoin while ensuring that every ARC token is backed by real, regulated financial instruments held within India’s oversight framework.
By doing so, policymakers hope to prevent liquidity from migrating into foreign dollar-backed stablecoins, which have surged in popularity due to recent U.S. regulatory shifts.
Why India wants ARC now
The timing of ARC’s development is strategic. Concern within emerging markets has grown after the Trump administration passed the GENIUS Stablecoin Act, a landmark U.S. law that formally legalized dollar-backed stablecoins.
The move has fuelled fears that savers in developing economies may increasingly shift their holdings into digital dollars, draining domestic deposits.
A recent analysis from Standard Chartered warned that emerging-market banks could face up to $1 trillion in deposit outflows over the next three years as dollar stablecoins become more accessible globally. Indian officials view ARC as a crucial countermeasure, designed to keep liquidity and the associated economic activity within India’s borders.
Complementing the RBI’s CBDC, not replacing it
India already operates a digital rupee through the Reserve Bank of India’s Central Bank Digital Currency (CBDC). ARC is not intended to compete with or undermine the CBDC. Instead, it is meant to function as what insiders describe as a “regulated interaction layer” created by the private sector, operating atop the central bank’s settlement infrastructure.
In this model, the RBI’s CBDC remains the foundation of monetary settlement, preserving sovereignty and security, while ARC becomes the programmable layer on which fintech platforms, enterprises, and payment innovators can build advanced services.
This includes automated payments, smart-contract-based settlement systems, programmable remittances, and more—capabilities the CBDC alone does not directly provide.
Strict controls on who can mint ARC
Maintaining India’s long-standing policy of keeping the rupee only partially convertible forms the core of how the ARC framework is being designed. Sources familiar with the discussions said that only business accounts will be permitted to mint ARC tokens, with individuals completely excluded from this process.
The restriction is intended to ensure that every minting action remains compliant with the Liberalized Remittance Scheme (LRS), which strictly regulates the amount of foreign currency an individual can legally convert or transfer.
By limiting the minting process to corporates, ARC naturally positions itself as a tool for business payments, enterprise settlement layers, supply-chain operations, and highly regulated fintech systems. It is not meant to serve as a speculative instrument for retail users, nor as a channel that could facilitate the movement of money outside India’s oversight.
Controlled trading using Uniswap v4 hooks
India’s push for ARC comes as many countries are setting up rules or launching their own stablecoins. With digital money increasingly tied to global economic influence, India is positioning ARC to protect domestic liquidity while supporting controlled, regulated innovation in digital finance.
With the U.S. now openly supporting dollar-backed stablecoins through the GENIUS Act, and with regions like Singapore, Japan, and the UAE implementing their own digital-asset frameworks, India is positioning ARC as both a defensive and progressive measure.
Officials familiar with the matter say the ARC token could strengthen demand for public debt instruments, keep innovation within the domestic economy, and offer a safer alternative to unregulated or foreign-backed stablecoins that could otherwise drain liquidity from Indian banks.
Tentative timeline and next steps
While ARC is targeting a Q1 2026 go-live window, the timeline depends on regulatory approvals, technical testing, banking integrations, and security audits. Preparations will include final clearance from the Reserve Bank of India, integration with the CBDC’s settlement layer, onboarding of major banks and vetted fintechs, and controlled pilot trials across enterprise payment systems.
If ARC works as planned, it could become an example for other developing countries that want to protect their financial systems while still using modern technology. As stablecoins start to influence global power as much as innovation, ARC might show how a country can adopt new digital tools without giving up control over its own currency.
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