India: RBI Omits Cryptocurrency-Based Projects from Fintech Regulatory Sandbox
The Reserve Bank of India (RBI) on April 18, 2019, published the terms of its fintech-focused regulatory sandbox. While the report highlights the importance of blockchain technology for various applications, it explicitly rejects all sorts of cryptocurrency-based businesses from being included in the sandbox.
Blockchain is Cool; Crypto, Not So Much
Per the sandbox draft, the RBI seems to be in no mood to promote India’s already reeling crypto ecosystem. This comes despite the demand in the country for positive crypto regulations so it doesn’t miss out on the benefits of cryptocurrencies before it gets too late.
In the report, the RBI advocates a regulatory sandbox approach to test the pros and cons of emerging trends in fintech including blockchain technology, machine learning, and artificial intelligence (AI). The report reads in part:
“The proposed financial service to be launched under the RS should include new or emerging technology, or use of existing technology in an innovative way and should address a problem, or bring benefits to consumers.”
For the uninitiated, a regulatory sandbox is typically developed by financial regulators to test emerging and disruptive technologies in a controlled environment over a set period of time.
In November 2018, Hong Kong unveiled its own regulatory sandbox to oversee the local cryptocurrency industry. However, a few weeks later the country’s financial watchdog, the Securities and Futures Commission (SFC) warned investors that they’re at their own if they fall victim to any fraud orchestrated by cryptocurrency-based businesses.
Coming back to India, the report takes a comparatively stronger stance against digital currencies.
In the report, the RBI states that the proposed regulatory sandbox will not entertain any crypto-related projects. The document explicitly excludes cryptocurrencies, crypto-assets services, crypto trading, investing or settling, and initial coin offerings (ICOs) from the regulatory sandbox. The document notes:
“Any products or services which are already banned in India will likewise not be eligible for participation in the sandbox.”
Unsurprisingly, the decision to exclude crypto from the regulatory sandbox didn’t sit too well with Indian crypto enthusiasts. Indian crypto proponents took to Twitter to express their disappointment with the RBI’s decision.
RBI’s Push to Revamp the Indian Payments System
Although the proposed sandbox excludes crypto from its scope, it does, however, put weight behind the RBI’s mission to digitize India’s payments system.
The document states that the RBI is actively looking for projects that focus on the application of fintech in the fields of retail payments, international money remittances, digital identity, mobile payments, and financial inclusion.
RBI’s focus on the use of blockchain technology in the payments sector should hardly come as a surprise.
As reported by BTCManager on January 24, 2019, RBI’s banking-focused offshoot, the Institute for Development and Research in Banking Technology (IDRBT) unveiled a blueprint of the use of distributed ledger technology (DLT) in the fragmented Indian banking sector.