India to Launch Rupee Stablecoin Backed by Government Debt in Q1 2026

India prepares to launch the Asset Reserve Certificate (ARC), a rupee-backed stablecoin, in the first quarter of 2026. Developed by Polygon and India-based fintech firm Anq, the fully collateralized digital asset aims to retain domestic liquidity while fostering innovation.

🚨 JUST IN: INDIA PLANS TO LAUNCH ARC, A RUPEE-PEGGED DIGITAL ASSET BUILT ON POLYGON, IN EARLY 2026. pic.twitter.com/FTDvBcQNu2

— Coinwaft (@coinwaft) November 20, 2025

Sources familiar with the matter told CoinDesk that each ARC token will maintain a 1:1 peg with the Indian rupee. The token will be minted exclusively when issuers acquire cash or cash equivalents including fixed deposits, government securities, or cash balances.

This collateralization framework ensures transparency, safety, and regulatory compliance. ARC is designed to prevent liquidity outflow into dollar-backed stablecoins, keeping capital within India’s domestic economy while creating demand for public debt instruments.

Two-Tier Framework with India’s RBI’s CBDC

The proposed digital token will complement the Reserve Bank of India’s Central Bank Digital Currency by serving as a regulated interaction layer.

In this two-tier structure, the RBI’s CBDC remains the ultimate settlement layer, safeguarding monetary sovereignty and security.

Meanwhile, the private sector operates the platform fostering innovation in payment solutions, programmable transactions, and remittance systems.

This arrangement maintains central oversight over the monetary base within India’s financial and regulatory boundaries.

Sources said ARC will align with rupee partial convertibility rules. The Indian rupee remains fully convertible for current account transactions such as trade, business payments, and remittances. However, capital account transactions remain restricted to protect economic stability.

The stablecoin will enable payments for business transactions without requiring full convertibility. Only business accounts will be authorized to mint ARC tokens, ensuring compliance with the Liberalised Remittance Scheme governing individual foreign exchange transactions.

Following this structure, ARC’s ecosystem will use Uniswap v4 protocol hooks to restrict token swaps exclusively to whitelisted addresses. This mechanism reinforces controlled access and regulatory adherence across the platform.

Forex Reserves Decline Amid Market Pressures

India’s foreign exchange reserves fell by $6.93 billion to $695.36 billion. as of October 31, 2025. The Reserve Bank of India released data showing the second consecutive weekly decline in reserves.

🚨India's foreign exchange reserves drop by $6.93 billion to $695.36 billion.

— Indian Infra Report (@Indianinfoguide) October 31, 2025

Foreign currency assets, expressed in dollar terms, reflect the appreciation or depreciation of non-US units like the euro, pound, and yen. Gold reserves declined by $3.8 billion to $101.72 billion during the reporting week.

In contrast, the central bank’s gold reserves had hit a record $100 billion in October as the yellow metal rallied in global markets before recording a crash. Special Drawing Rights decreased by $19 million to $18.64 billion.

Meanwhile, India’s reserve position with the International Monetary Fund increased by $16.4 million at $4.77 billion in the reporting week. The decline in overall reserves raises questions over global market pressures, currency movements, and gold price corrections.

The ARC launch comes as India seeks to balance innovation in digital assets with regulatory control. The stablecoin’s government debt backing provides a stark contrast to foreign-backed stablecoins or speculative tokens often criticized for lacking transparency.