India plans to launch ARC, a digital asset linked to the rupee, in early 2026. This project is developed with Polygon Labs and the fintech company Anq. ARC aims to integrate blockchain technology while keeping monetary stability.

It is fully backed 1:1 by the Indian rupee and the government’s reserves. ARC will work alongside the Reserve Bank of India’s Central Bank Digital Currency (CBDC) to improve liquidity and meet regulatory requirements, while also maintaining control over the money supply.

Balancing innovation and sovereignty

India has launched ARC to build a clear and regulated digital asset system that supports domestic economic growth and financial sovereignty. Unlike volatile cryptocurrencies, ARC is pegged to the rupee, which helps keep prices stable. This makes it a trustworthy option for digital transactions.

A key goal is to reduce capital flight to foreign dollar-backed stablecoins, which have historically drained liquidity from the domestic economy. By offering an alternative backed by the rupee, ARC aims to retain liquidity within India, increase demand for public debt instruments, and strengthen the financial system.

How does ARC work? 

ARC will operate on the Polygon blockchain, which is a Layer-2 solution for Ethereum. It is known for quick, affordable transactions and its ability to scale. This infrastructure supports widespread use by allowing small payments, transfers, and decentralised applications (dApps) that need a stable digital token.

Importantly, ARC’s issuance and usage will be tightly controlled. Only approved corporate and institutional accounts can issue or redeem ARC, and all transfers will be limited to whitelisted accounts. This will be enforced through protocol-level controls, such as Uniswap v4 hooks.

This design follows India’s partially convertible currency rules and capital control policies, ensuring it complies with regulations against money laundering and funding illegal activities.

ARC supports the RBI’s Digital Rupee initiative by offering a stablecoin that runs on blockchain technology. This helps expand the digital currency ecosystem. Its design addresses liquidity management and user accessibility challenges faced by the CBDC rollout. 

By integrating with scalable and interoperable blockchain solutions, ARC supports India’s broader vision to embed blockchain technology across sectors and improve transparency, security, and efficiency.

This partnership helps position India as a leader in adopting digital currency among emerging markets and provides a model for other countries trying to balance innovation with monetary control.

Success hinges on overcoming technology barriers

Despite its promise, ARC faces several hurdles. India needs to build a strong blockchain system that can grow to support mass adoption without sacrificing security or speed.

Public trust will also require transparent governance and clear regulatory frameworks, alongside education to overcome scepticism. 

India also needs to make sure that blockchain works smoothly with current banking and payment options to avoid fragmentation. Lastly, regulatory clarity and international cooperation will be critical as India navigates this space.

While this move is strategic, India needs to amp up to modernise its financial infrastructure while maintaining monetary sovereignty. India has already experienced success with its Unified Payments Interface (UPI), which gives hope for ARC’s success, too.