OPINION | India’s tokenized rupee moment is here

Reports suggest that Indian technology firms are exploring a rupee-denominated stablecoin model backed by government securities

India has built its digital payments foundation piece by piece, creating one of the world’s most advanced and inclusive financial technology networks.

A government-developed public infrastructure for digital payments has made it easy for average people to be part of a rapidly developing economy. The flagship Unified Payments Interface (UPI) has made instant money transfers a part of daily life; demand over the protocol is soaring. October alone saw more than 20 billion transactions made on UPI, with volume up 5% over the previous month and value soaring 10% to more than Rs 27 trillion.

The much-discussed Open Network for Digital Commerce (ONDC) may not have reached its early ambitions, but it helped pioneer India’s open-infrastructure movement — proving that interoperability can be a public good, even if commercial traction takes longer. Its real legacy lies in showing how digital public goods can be reused and reimagined, not just for commerce but for finance.

An Indian stablecoin may not be too far away

Now, attention is shifting toward a new layer of innovation: sovereign-backed digital instruments that extend the logic of UPI and the e₹ into programmable, cross-border liquidity.

Reports suggest that Indian technology firms are exploring a rupee-denominated stablecoin model backed by government securities, potentially enabling regulated, on-chain settlement that complements the RBI’s digital currency.

Together, these developments point to India’s next frontier — a programmable public infrastructure that could connect domestic and international finance through a single, trusted digital layer. In May, RBI figures revealed that circulation of the digital rupee had increased fourfold in a year. By 2026 we can expect it to move from pilot to scale, thus completing a decade-long build-out.

Digital currency eliminates settlement lag

The digital rupee, known as the e₹, is a token that acts like digital cash. Fully backed by the RBI, the e₹ is supported by an ever-growing range of banks, businesses, smaller retailers, and individuals, all of whom benefit from instant transfers, and the knowledge that each token is backed one-to-one by reserves. The change is technical but simple in effect: value moves directly between parties without long settlement chains.

Far less friction

According to the RBI’s latest progress update, the wholesale digital rupee pilot already includes trade finance transactions. Banks such as HDFC Bank and ICICI Bank are testing programmable payments and on-chain credit settlement.

Over the next year these networks are expected to link up with UPI and existing central bank digital currency systems, forming what can be seen as a shared digital layer for both retail and institutional finance. Together, these links could evolve into what might be called India’s programmable public infrastructure stack, connecting central-bank money to a single national network.

Tokenised rupee’s potential

UPI united India’s fragmented payment systems. The tokenised rupee could do the same for the boundary between traditional finance and blockchain networks. It offers the flexibility of stablecoins but the backing of the central bank. Payrolls, supplier payments, and digital lending could all move within a single connected infrastructure, settled instantly and recorded transparently. The potential benefits to India’s businesses and its economy are virtually limitless, unleashing a flood of liquidity through faster, more trusted payments.

This is all made possible thanks to the constantly-advancing capabilities of blockchain infrastructure. Regulated banks could issue and redeem rupee tokens on public blockchains while keeping full oversight and compliance. The result would be a bridge between regulated finance and open Web3 markets, with each side operating within clear rules but sharing the same settlement layer.

Breaking down international barriers

There is also a strategic dimension. As more countries look for trade options outside the US dollar, India can present the rupee as a neutral settlement currency across South Asia, the Middle East, and Africa.

The cross-border corridor between the RBI and the Central Bank of the United Arab Emirates is a first example. In time, similar corridors could connect Indian exporters to partners in Indonesia or Kenya, all clearing value in digital rupees on shared infrastructure.

CBDCs and stablecoins address different needs

Some see competition between central bank digital currencies (CBDCs) and stablecoins. In reality, they each serve different purposes. Tokenised rupees can handle domestic and regulated flows, while Indian rupee (INR) stablecoins on public blockchains can power cross-border trade and programmable payments.

They also act as a kind of ‘universal language’ for the new wave of digital finance, connecting the burgeoning tokenized asset economy with the traditional fiat system.

Used together, stablecoins and CBDCs can extend the reach of India’s financial system — strengthening, rather than fragmenting, its role in the global economy.

(Aishwary Gupta is Global Head of Payments & Real-World Assets, Polygon Labs.)

Views are personal and do not represent the stand of this publication.