There is a quiet, invisible river of money flowing out of countries every day. It doesn’t travel in armored cars or briefcases. It moves as digital tokens, specifically dollar-backed stablecoins, seeking the perceived safety of the world’s reserve currency. For many emerging economies, this is more than a leak. It’s a hemorrhage. India is now planning to build a dam.
- India is developing the Asset Reserve Certificate (ARC), a new digital asset launching potentially in early 2026, in partnership with Polygon and Anq. This initiative aims to retain domestic liquidity and foster innovation within India’s regulatory framework.
- The ARC is designed to be a fully collateralized, one-to-one digital rupee, backed by assets like cash or government securities, contrasting with algorithmic stablecoins to ensure safety and transparency.
- This system will operate on a two-tier structure, with the RBI’s CBDC as the foundational layer and the private sector ARC operating on top for innovation while maintaining central oversight.
Sources say a new digital asset, the Asset Reserve Certificate or ARC, could launch in the first quarter of 2026. This isn’t another speculative coin hoping for a moonshot. It’s a carefully constructed piece of financial infrastructure, a joint effort between Ethereum scaling developer Polygon and Indian fintech firm Anq.
The goal is simple. Keep Indian liquidity and innovation inside India. The method is a bit more complex. It involves creating a digital rupee that plays by the government’s rules, from the ground up.
A Token on a Tight Leash
Each ARC token will be pegged one-to-one with the Indian rupee. This isn’t based on an algorithm or a basket of other crypto assets. It’s backed the old-fashioned way. A new ARC token can only be created when the issuer parks an equivalent amount of real-world assets like cash, government securities, or fixed deposits.
This is a direct response to the shaky history of other stablecoins. The design is meant to provide transparency and safety, a stark contrast to tokens that have lost their peg and wiped out fortunes. The idea is to build trust not through marketing, but through verifiable collateral.
But why build this at all? India’s central bank, the Reserve Bank of India (RBI), is already developing its own Central Bank Digital Currency (CBDC). Isn’t this redundant?
Not quite. The plan is for a two-tier system. Think of the RBI’s CBDC as the foundational layer of the monetary system. It’s the bedrock, the ultimate settlement asset, ensuring the government maintains control over its monetary sovereignty. It’s the digital equivalent of the government printing press.
The ARC token operates on the second tier. It’s a platform run by the private sector, designed for innovation. This is where new payment solutions, programmable money, and more efficient remittance systems can be built. It’s a regulated sandbox, sitting right on top of the central bank’s foundation.
This structure allows for private sector agility without sacrificing central oversight. The RBI controls the monetary base, while companies like Polygon and Anq build the user-facing applications. It’s a partnership, a compromise between state control and market-driven progress.
Building a Walled Garden
Controlling a digital asset in a borderless digital world is a challenge. India’s approach relies on a few clever constraints, both legal and technical.
First, the ARC will respect the rupee’s partial convertibility. In India, the rupee is fully convertible for day-to-day business like trade and payments. But there are restrictions on converting it for capital transactions, like buying assets abroad. This is a long-standing policy to protect economic stability.
The ARC token is designed to live within these rules. Minting new tokens will be restricted to business accounts only. This ensures the system complies with regulations like the Liberalised Remittance Scheme (LRS), which governs how much foreign currency an individual can move abroad.
So, a company can use ARC for business payments, but an individual can’t just mint a million tokens to speculate on foreign markets. It’s a digital fence built around a specific use case.
The technical enforcement is just as important. The ARC ecosystem will use a feature of the Uniswap v4 protocol called “hooks.” You can think of these hooks as a bouncer at a club. They will check a list of pre-approved, or whitelisted, addresses. Only users on that list will be able to swap ARC tokens.
This prevents the token from being traded freely on decentralized exchanges around the world, keeping it within a controlled, compliant environment. It’s a closed loop by design.
A Global Economic Game
This project didn’t appear in a vacuum. It’s a direct reaction to a global trend. The rise of dollar-backed stablecoins, accelerated by pro-crypto regulatory moves from President Trump’s administration, has financial authorities in many nations worried.
The GENIUS Stablecoin Act, for instance, legalized dollar-backed stablecoins in the U.S. and raised alarms about a potential tidal wave of capital leaving smaller economies. Savers and investors in countries with volatile currencies could simply swap their local money for a digital dollar with a few clicks.
This isn’t a theoretical threat. A recent report from Standard Chartered warned that emerging market banks could see deposit outflows of up to $1 trillion over the next three years. That’s a staggering amount of capital that would no longer be available for domestic lending and investment.
Seen through that lens, India’s ARC is more than a fintech product. It’s a strategic defense. It’s an attempt to offer the benefits of digital assets, like efficiency and programmability, without ceding monetary control to the U.S. dollar.
It’s a high-stakes experiment in building a sovereign digital currency ecosystem. And you can be sure that finance ministers from Brazil to Nigeria are watching very closely.