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India’s debt-backed stablecoin challenge to US dollar dominance explained
Advocates argue the ARC token will lower India’s borrowing costs, strengthen the rupee and stem outflows to dollar-backed cryptocurrencies
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As governments worldwide debate the merits and dangers of digital currencies, India appears poised to launch its own state-backed stablecoin that uses government debt as collateral.
Proponents argue that the Asset Reserve Certificate (ARC) could hasten the global drive towards de-dollarisation, lower India’s borrowing costs and create a “virtuous cycle” for public funding by diversifying the country’s investor base.
By tying the token to sovereign debt, developers aim to create a transparent system that complements the central bank’s monetary framework and limits outflows of local liquidity into dollar-backed cryptocurrencies.
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The ARC, under development by international blockchain giant Polygon and India-based fintech Anq, would function as a stablecoin: a cryptocurrency engineered to maintain a steady value, avoiding the volatility that plagues speculative digital assets like bitcoin.
Every unit of the regulated digital token would be backed one-to-one by Indian government securities or treasury bills – debt instruments issued by the state to finance public spending – maintaining a steady value pegged to the rupee while operating on private blockchain infrastructure.
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