Polygon bets on domestic stablecoin future with proposed INR-backed token built for remittances, on-chain assets

India’s long-awaited move toward a regulated, locally issued stablecoin ecosystem is finally gathering momentum, and Polygon is positioning itself at the centre of that shift with its proposed INR-based stablecoin project. Polygon and ANQ Finance have been developing a sovereign-backed Indian stablecoin model designed in consultation with policymakers in India. If final approvals come through, the model could go live by January 2026, marking one of the first attempts to tokenise Indian public debt instruments within a regulated framework.

The initiative is seen as a milestone for India’s on-chain financial infrastructure, blending public-sector oversight with private-sector execution. In a conversation with Fortune India, Aishwary Gupta, Global Head of Payments & RWA at Polygon Labs, detailed how the proposed stablecoin fits into India’s digital finance roadmap, and how Polygon’s Asset Reserve Certificate (ARC) infrastructure can address long-standing gaps in CBDC usability, remittances, tokenised assets and cross-border payments.

Gupta also spoke about Polygon’s partnership with ANQ Finance, saying the company has been focused on enabling the digital side of India through a stablecoin-driven transactional layer. Instead of building massive reserves, the objective is to create rails that generate value from transaction flows themselves, he said.

With the RBI already piloting its digital rupee, Gupta explained how Polygon-based ARC complements, not competes with, the CBDC. “When CBDCs are built on permissioned ledgers (like Hyperledger), they lack assets on-chain, so they don't offer anything you can't already do with UPI. CBDC today is not an upgrade: no interest or returns, limited interoperability and only a handful of banks support it.” 

Notably, ARC is a model developed by fintechs in India for an INR-pegged token backed by Indian government securities. ARC, said Gupta, converts UPI/CBDC into an extended, tokenised form so users can access on-chain assets and return to the banking system seamlessly. “That enhances CBDC usability rather than replaces it.”

On the regulatory front, Polygon’s immediate focus is to bring the stablecoin to market by leveraging its existing technology stack. Gupta described it simply: “The closest analogy is Paytm, which took your money and showed a digital representation. We’re doing the same, except the representation sits on a blockchain instead of a Web2 backend.” He stressed that no new regulation is required as long as the token remains fully backed. “We take the money, keep it in the bank as cash reserves or fixed deposits, and maintain a 1:1 backing that auditors can verify against on-chain balances.”

Responding to recent policy discussions, Gupta said the government has advised Polygon to start with simple, 1:1 cash and fixed deposit backing rather than tokenised G-Secs for the initial launch. “Over the past three weeks, that has been the consistent feedback. So the stablecoin will always remain fully backed by cash and cash equivalents, primarily cash and FDs, not 100% G-Secs.”

Despite global momentum, India still lacks a credible, regulated INR stablecoin. If Polygon, being one of the promising blockchain companies, can pull it off, it could lead to a new wave of innovation on the blockchain front. Gupta pointed out that foreign projects have struggled in India because regulators cannot oversee offshore issuers “minting a digital twin of the rupee.” Earlier attempts, such as Dubai-issued INR-denominated tokens backed by dollars, did not meet regulatory expectations, he said, adding that domestic teams are exploring possibilities, but no final regulator has signed off yet. Polygon’s advantage, he said, is simply being an Indian-founded, globally recognised brand.

For the adoption of the proposed stablecoin, Polygon is targeting two areas: remittances and on-chain asset purchases. “Today, if someone wants to buy something like a tokenised BlackRock fund, the payment must go through the banking system, with high costs and multiple intermediaries, and you still don’t get custody. By using an interoperable layer across UPI, CBDC and ARC, those blockchain-native assets could be purchased directly, without that friction.”

Stablecoins have been one of the key innovations that have come out of the global crypto space. Their popularity has also surged in a short span of time. The stablecoin market has rapidly surpassed $300 billion in total market capitalisation, transitioning from a tool for crypto trading to a global medium for digital savings and payments for businesses and individuals alike. According to global payments major Visa, stablecoins are poised to disrupt “payments,” “lending,” and “capital markets,” becoming “foundational financial infrastructure.”

Chainalysis and TRM data also show India as the world’s largest stablecoin market, yet domestic exchanges account for barely 2% of reported volume, meaning most transactions occur outside regulated channels. Gupta highlighted rampant misuse through informal off-ramping routes, such as Dubai-based gold shops and scams leveraging USDT and USDC. “If the asset is minted in India, the government has jurisdiction and can act quickly. Misuse will always appear first, but having a domestic, compliant stablecoin gives the system tools to respond rather than letting the entire market operate offshore.”

Why India can no longer ignore stablecoins? 

Stablecoins offer “a more direct pathway for the transfer of money” as blockchains enable the possibility of borderless, peer-to-peer transactions, which significantly reduces the number of financial intermediaries required to conduct transactions and manage financial assets. 

Stablecoins are currently found in the market in two major forms: centralised fiat-backed ( USDT, USDC, etc., backed by short-term US-treasury bills and cash equivalents) and crypto-backed and yield-bearing stablecoins, issued via smart contracts on public blockchains and backed largely by digital assets like Ether. 

As more businesses adopt them “as a means of circumventing the high costs of cross-border traditional payments,” consumer adoption will follow, since “stablecoins offer a borderless and interoperable financial medium that stands to revolutionise the fintech and personal finance space,” says a Binance November report titled The Stablecoin Business.

DeFi is likely to play a large role in this ongoing fintech revolution. DeFi, by embedding financial products into automated, digital smart contracts, can offer higher yield and savings rates than most traditional sources.