Polygon and fintech startup Anq are reportedly developing a sovereign-backed Indian INR stablecoin model, said to be issued only against Indian government securities and Treasury Bills. If successful, it would mark India’s first serious attempt to fuse blockchain infrastructure with sovereign finance, creating a potential bridge between the rupee and Web3 liquidity.
In this piece, we’ll break down how an Indian rupee stablecoin could reshape India’s digital economy, explore how the proposed model might function, and analyse its broader implications.
A stablecoin is a type of cryptocurrency designed to maintain a fixed value, usually pegged to a real-world asset such as a fiat currency or commodity. Unlike Bitcoin or Ethereum, whose prices fluctuate with market demand, stablecoins aim for stability. In the case of an INR stablecoin, one token typically equals one unit of the underlying asset.
This makes them ideal for payments, savings, and cross-border transfers while retaining blockchain’s benefits of speed, transparency, and programmability.
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Under the proposed system, rupee-linked digital tokens would be fully backed by Indian government securities and Treasury Bills.
Each token would represent a claim on an equivalent value of these sovereign assets held in reserve, ensuring its value mirrors that of the Indian rupee.
The blockchain layer would handle issuance, transfer, and audit transparency, while regulated intermediaries could oversee custody of reserves.
In practice, users could hold and transfer this token as easily as digital cash, verified instantly on-chain. If implemented successfully, this model could connect India’s traditional financial system with Web3 infrastructure, creating a programmable, secure bridge between rupee liquidity and decentralised finance.
According to reporting from TradingView, the initiative—internally referred to as the Asset Reserve Certificate (ARC) model—would be backed not by rupees themselves but by sovereign debt instruments. This distinction makes it less a free-floating stablecoin and more a tokenised version of government securities, tightly controlled within India’s financial framework.
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As India stands at the intersection of blockchain and sovereign finance, several outcomes are possible depending on how regulators and policymakers shape the ARC model.
While UPI already makes everyday payments fast and seamless, a sovereign-backed stablecoin would transform what happens beneath the surface. UPI is essentially a real-time messaging system for payment instructions—the actual money still moves through traditional interbank settlement systems.
A rupee-linked token, by contrast, would be the value itself, enabling direct on-chain transfer of funds with instant finality and no reconciliation delay. This doesn’t replace UPI; it complements it as a deeper settlement layer.
Such an infrastructure could allow businesses to automate supplier and tax payments through smart contracts, improve liquidity management, and settle high-value transactions instantly. In short, while UPI digitised how Indians pay, a rupee-backed token could digitise how money itself moves and works.
Alternatively, the government could restrict ARC circulation to licensed financial institutions. In that case, it would serve purely as a backend settlement instrument rather than a retail stablecoin.
This version of the ARC would resemble a tokenised form of government securities, allowing banks and fintechs to settle wholesale transactions and repos with greater speed and efficiency—similar to Singapore’s Project Guardian, which pilots tokenised bond and FX settlements under central bank oversight.
Such a structure would enhance institutional liquidity and create a secure testbed for tokenised assets within a regulated environment, potentially paving the way for future CBDC–DeFi integrations. Yet, while it ensures systemic safety, it also limits retail innovation and keeps liquidity confined to institutional corridors.
Based on public information, the proposed ARC token appears to differ significantly from the RBI’s Central Bank Digital Currency (CBDC).
A CBDC, or digital rupee, is a legal tender issued directly by the Reserve Bank of India and represents a claim on the central bank itself, essentially digital cash. The ARC, on the other hand, would be a tokenised financial instrument backed by sovereign debt and possibly issued by a regulated intermediary.
In short, the CBDC represents money itself, while the ARC represents a claim on sovereign assets.
The two could coexist: one as India’s official digital currency, and the other as a programmable, yield-bearing settlement layer within the regulated fintech ecosystem.
However, no official confirmation has been made, and until government sources clarify the project’s scope, these distinctions remain speculative.
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A sovereign-backed Indian INR stablecoin could also serve as a tool of financial diplomacy. By enabling instant, low-cost settlements anchored to Indian sovereign assets, such a system could extend India’s influence across BRICS, SAARC, and the broader Global South.
For instance, it could facilitate rupee-denominated trade settlements with neighbours like Sri Lanka or Bangladesh—reducing reliance on the U.S. dollar—or support cross-border infrastructure and energy projects settled in digital rupees within BRICS frameworks.
If realised, the ARC model could project India’s monetary stability and technological leadership simultaneously, positioning it as an exporter of regulated digital finance rather than a follower of Western crypto innovation.
Capital control compliance poses another test.
India’s foreign exchange laws (FEMA) restrict the cross-border movement of rupee-linked assets. If ARC tokens gain international use, mechanisms such as whitelisted wallets, programmable restrictions, or geofenced smart contracts may be required to prevent arbitrage or illicit flows.
Liquidity and redemption risks also loom large. Because the ARC would be backed by government securities rather than cash, maintaining a strict 1:1 rupee peg could become difficult during periods of interest-rate volatility. Redemption bottlenecks or market illiquidity in secondary G-Sec markets could undermine trust in the system.
Finally, technology and transparency risks will define long-term credibility. Publicly verifiable audits, secure custody of sovereign reserves, and resilient smart contract frameworks will be crucial. Any breach or opacity could trigger public distrust and regulatory backlash, threatening one of India’s most promising blockchain finance experiments.
The success of the ARC initiative will depend on how effectively India balances innovation with regulatory clarity. Early pilots will reveal whether this remains an institutional experiment or evolves into the foundation of India’s on-chain financial ecosystem. Whether it becomes a controlled pilot or a transformative infrastructure layer, one thing is certain: India is no longer watching the global stablecoin race from the sidelines—it’s entering it, on its own terms.
India is no longer watching the global stablecoin race from the sidelines—it’s entering it, on its own terms. Follow Mudrex and stay ahead of India’s Crypto revolution. Download the Mudrex app to start your crypto journey today, and visit our Learn section for clear, research-driven insights into India’s fast-changing digital economy.
Krishnan is a Bangalore-based crypto writer dedicated to simplifying complex crypto concepts. He covers blockchain, DeFi, and NFTs, with a focus on real-world asset tokenization and digital trust. Previously he has written on Real Estate related assets for NoBroker. Krishnan holds a B.Tech degree from the College of Engineering Trivandrum.
