Polygon’s ARC: Potential for INR Stablecoin to Enhance India’s UPI Ecosystem

• India’s UPI handles over 20 billion transactions monthly, outpacing global peers and questioning the need for parallel stablecoin systems.

• Stablecoin usage in India grows steadily, with $45 billion transferred last year, mainly for trading and remittances.

• Polygon’s Aishwary Gupta emphasizes regulatory compliance: “We don’t want a stablecoin the wrong way — it’s the government’s call, we just embrace the rules,” highlighting ARC’s potential for controlled innovation.

Explore whether India needs an INR stablecoin amid UPI’s dominance. Learn about Polygon’s ARC project, regulatory hurdles, and future of programmable money. Dive into insights now for crypto-savvy updates.

What is an INR Stablecoin and Why Consider It in India?

An INR stablecoin is a cryptocurrency pegged 1:1 to the Indian rupee, backed by reserves to maintain stability for transactions and value storage. In India, it could bridge traditional finance with blockchain, enabling instant settlements and programmability. Despite UPI’s efficiency, an INR stablecoin offers unique advantages in global trade and DeFi, as explored by projects like Polygon’s ARC.

How Does Polygon’s ARC Project Aim to Introduce a Compliant INR Stablecoin?

Polygon’s ARC, or Asset Reserve Certificate, is a rupee-pegged deposit token launching in Q1 2026 on the Polygon chain, partnering with Anq for compliance. Unlike traditional stablecoins, ARC functions as an embedded transaction layer, restricted to regulated entities like banks and NBFCs for minting and custody. Aishwary Gupta, Polygon’s Global Head of Payments and RWA, explained in an interview at India Blockchain Week 2025: “The difference is that it becomes embed on the transaction layer and functions as a means of transaction.” This design aligns with RBI’s framework, complementing the e-Rupee CBDC by facilitating cross-border swaps, such as converting USDC to ARC for seamless INR redemption, reducing dollar circulation pressures.

The global stablecoin market reached $300 billion in market cap by late 2025, with USDT and USDC dominating 90% of volume for remittances, DeFi, and trading. In India, despite strict regulations, stablecoin transfers exceeded $45 billion in the past year, per Chainalysis’ 2025 APAC Crypto Adoption Report. Usage focuses on crypto trading on platforms like perpetual futures, freelancer payments, and hedging rupee volatility during elections. A niche group engages in DeFi yield farming, but retail payments remain UPI’s domain.

Previous INR stablecoin attempts, such as Phi and Rupe, faltered due to RBI classifying them as currency under central bank purview. The RBI’s e-Rupee pilots in 2022-2023 aimed to preempt private tokens, yet volumes lag UPI significantly. Global firms like Circle and Tether explored Indian partnerships, but progress is limited. ARC stands out by emphasizing deposit token mechanics, ensuring reserves stay off-chain in banks, promoting regulatory harmony.

For cross-border efficiency, ARC enables quick USD inflows: users swap foreign stablecoins to ARC, redeem INR domestically, aiding RBI’s market control. Gupta noted: “It helps push back USD circulation in India while continuing RBI dominance.” Restricted issuance ensures integrity, positioning ARC as a programmable layer atop UPI and CBDC.

Frequently Asked Questions

What Are the Potential Benefits of an INR Stablecoin for India’s Cross-Border Payments and DeFi Integration?

An INR stablecoin could streamline cross-border payments by enabling 24/7 settlements with CBDC bridges, reducing SWIFT costs for exporters and freelancers. In DeFi, it allows tokenized assets, automated yields, and conditional transfers, fostering innovation while minimizing forex risks. Regulated versions like ARC would enhance RBI oversight on capital flows, potentially attracting $ billions in liquidity without eroding UPI’s retail strength.

Is UPI Superior to Stablecoins for Everyday Transactions in India?

Yes, UPI excels for domestic retail with real-time, zero-cost transfers via 500 million users monthly, processing 20 billion transactions worth $273 billion in November 2025 alone. Stablecoins shine in global, programmable scenarios but incur minor fees and face adoption hurdles; for daily needs like shopping or remittances under limits, UPI’s familiarity and speed make it the clear choice.

Key Takeaways

• UPI’s Dominance: With near-instant, free transactions for half a billion users, UPI solidifies India’s lead in digital payments, sidelining stablecoins for retail.
• Stablecoin Growth: India’s $45 billion in stablecoin volume underscores demand for global tools, but regulation limits INR variants to compliant models like ARC.
• Regulatory Path Forward: Success hinges on RBI viewing INR stablecoins as complements to CBDC, unlocking programmability—let the market decide, as Gupta advises.

Conclusion

In summary, while an INR stablecoin isn’t essential for India’s robust UPI ecosystem, projects like Polygon’s ARC highlight its value for programmable money and efficient cross-border INR flows. By integrating secondary keywords like DeFi interoperability, such innovations could bolster financial inclusion without regulatory friction. As policy evolves, India stands poised to blend blockchain with its digital prowess—watch for RBI decisions to shape this frontier.