India’s Debt-Backed ARC Token Set for Possible Launch in Q1 2026

TLDR

Table of Contents

ARC token will be backed 1:1 by the Indian rupee and minted with cash equivalents like government securities.
The token aims to prevent capital outflows by limiting reliance on dollar-backed stablecoins.
ARC will operate as a regulated layer, complementing the Reserve Bank of India’s CBDC.
Only business accounts will be allowed to mint ARC tokens to ensure regulatory compliance.

India’s upcoming digital stablecoin, the Asset Reserve Certificate (ARC), is slated for a possible launch in the first quarter of 2026. Backed 1:1 by the Indian rupee, ARC will aim to address concerns over capital flight and reduce dependence on foreign-backed stablecoins. Developed by fintech firm Anq and Polygon, a leader in Ethereum scaling, the ARC token is designed to help retain liquidity within India’s economy.

Preventing Liquidity Outflow to Dollar-Backed Stablecoins

One of the main objectives of the ARC token is to prevent the outflow of liquidity into dollar-backed stablecoins, which have gained traction in emerging markets. As the world’s largest stablecoins like USDT and USDC are backed by the U.S. dollar, they pose a risk to developing economies, where domestic currencies might be undermined by the widespread use of these stablecoins.

ARC will be minted only when issuers acquire cash or liquid assets such as government securities or fixed deposits. This structure ensures that the token is fully backed by real-world assets, providing transparency and reducing the risks often associated with unbacked or speculative cryptocurrencies. This design will help ensure that ARC serves the needs of the Indian economy while safeguarding against external market volatility.

According to sources, ARC will be tied to India’s current account transactions, which include trade, remittances, and business payments. By doing so, it will ensure compliance with India’s current financial regulations while fostering economic stability.

Complementing the Reserve Bank of India’s CBDC

The ARC token is not intended to replace the Reserve Bank of India’s (RBI) Central Bank Digital Currency (CBDC), which is expected to serve as the ultimate settlement layer for India’s digital economy. Instead, ARC will function as a private-sector-developed, regulated layer that complements the RBI’s CBDC. This two-tier framework aims to balance innovation and regulatory compliance, creating a controlled environment for the growth of digital payment solutions, including programmable transactions and remittances.

By integrating ARC within this framework, the private sector will be able to offer a range of payment and remittance solutions that work within the guidelines set by the RBI. This arrangement ensures the central bank retains control over the monetary system while fostering innovation in financial technology.

Minting and Access Control for Business Accounts

Another key feature of the ARC token ecosystem is its focus on compliance. Only business accounts will be authorized to mint ARC tokens, in line with India’s Liberalised Remittance Scheme (LRS). This rule aims to ensure that only entities engaged in business transactions, rather than individual investors, will be able to use ARC for cross-border transactions.

To further ensure regulatory adherence, the ARC ecosystem will incorporate the Uniswap v4 protocol. This will limit token swaps to whitelisted addresses, preventing unauthorized or speculative trading. By restricting access, ARC will reinforce India’s financial stability and ensure that the system remains compliant with both national and international financial regulations.

Addressing Concerns of Capital Flight

India’s move toward a sovereign stablecoin comes at a time of heightened concern about capital flight from emerging markets. The legalization of dollar-backed stablecoins under U.S. regulation has raised alarms among central banks in developing economies. As a result, there is a growing need for countries like India to create digital assets that can retain capital within their borders while still providing the benefits of digital currencies.

India’s introduction of the ARC token aims to curb this trend and offer a stable alternative to dollar-backed stablecoins. By using the Indian rupee as collateral, ARC will offer a local digital currency solution that aligns with India’s economic interests.