The Indian government is on the brink of a significant shift in its approach to digital currency, considering the legal recognition of stablecoins in the upcoming Economic Survey 2025-26. This move could enable their use for certain transactions while the Reserve Bank of India (RBI) expands its digital rupee pilot program. As private firms innovate around sovereign-backed tokens such as the Asset Reserve Certificate (ARC), India aims to modernize its financial systems and strengthen the rupee against growing global digital currency competition.
Government and Regulatory Moves
India’s path toward digital currency is emerging with the government poised to propose the recognition of stablecoins as legal tender. According to sources, this initiative could be detailed in the Economic Survey 2025-26, signaling a strategic pivot towards integrating stablecoins into the formal economy. Currently, there is no regulatory framework governing these digital assets in India, prompting Finance Minister Nirmala Sitharaman to urge regulators to prepare a robust legal framework that can enable smooth operations in the growing stablecoin market.
RBI Governor Sanjay Malhotra emphasized that while the central bank does not target specific exchange rates for the rupee, it aims to manage severe volatility to ensure stability in the currency’s movement. This perspective reflects a more proactive government stance that seeks to embrace modern financial technologies while safeguarding India’s monetary interests. With stablecoins increasingly becoming a part of the global financial conversation, India appears ready to navigate these complex waters cautiously.
RBI’s Digital Currency Initiatives
As part of its progressive stance, the RBI has expanded its digital rupee pilot to encompass nearly 1 billion users, collaborating with over 50 banks and payment platforms. This initiative allows for various financial use cases, including peer-to-peer (P2P) payments, employee salaries, and merchant settlements. The scale of the digital rupee project far exceeds other initiatives such as China’s e-CNY, indicating India’s ambition in the realm of Central Bank Digital Currencies (CBDCs).
Recent pilot programs have also explored tokenization of certificates of deposit, positioning India as a leader in enhancing the security of financial markets via blockchain technology. Notably, fintech firm Cred has become the first private sector entity to integrate access to the digital rupee, showcasing the cooperation between the government and private firms in advancing digital financial solutions. As the RBI continues to evaluate and expand these programs, the focus remains on ensuring that the digital economy adheres to regulatory standards while fostering innovation.
Private Sector Innovation: The ARC Token
The development of the Asset Reserve Certificate (ARC) token by Polygon and Anq signifies a new milestone in India’s digital currency landscape. This sovereign-backed digital token is fully collateralized by government securities and Treasury Bills, aiming to offer a stable and regulated alternative to traditional stablecoins. Aligning with national monetary policies, the ARC is designed to be a non-speculative asset that reinforces the RBI’s monetary framework while operating solely within India’s financial perimeter.
It gives you the utility of a stablecoin but without the volatility or foreign exposure
notes a source involved in the initiative, highlighting the ARC’s potential to reduce reliance on volatile global currencies.
This innovative token is being developed to complement the existing CBDC framework, encapsulating a “Twin-Rupee” architecture where the CBDC acts as the settlement backbone while the ARC facilitates faster transactions. According to insights from those tracking the development, this dual structure allows the private sector to adapt and create new financial tools, ensuring the central bank retains its authority over monetary policy.
Strategic Implications and Future Outlook
As the Indian government prepares to unveil guidelines for stablecoins, transparency becomes paramount. These guidelines will require stablecoins to disclose reserves, integrate with RBI-approved systems, and comply with local tax laws. By domestically regulating offshore stablecoins, India aims to establish a clear monetary perimeter, positioning itself as a leader in regional digital currency governance.
India’s approach to stablecoins could have far-reaching implications across Asia, influencing countries like Hong Kong and Singapore that are experimenting with their own digital frameworks. The RBI is also establishing a digital currency sandbox to explore innovative applications while maintaining monetary stability. The overarching goal is to create a seamless environment for cross-border transactions, potentially incorporating tokenized stablecoins and digital rups into a consolidated financial architecture.
Charting a New Course in Digital Finance
As India strides toward establishing a robust framework for digital currencies, it faces the critical challenge of balancing innovation with regulatory oversight. The integration of sovereign-backed stablecoins within a comprehensive digital currency strategy could not only fortify the Indian rupee but also revolutionize financial transactions in the nation. By fostering a controlled environment for digital currencies, India sends a clear message that innovation must align with state interests, promoting a sustainable model for the global digital finance landscape.
