Reserve Bank Of India Excludes Crypto From FinTech Regulatory Sandbox

Daniel Fowler
April 23, 2019

The bank issued another statement in February 2017, advising the public that it had not given any license or authorization to any entity or company dealing in cryptocurrency.

In July 2016, the RBI formed an inter-regulatory Working Group (WG) to look into and report on the granular aspects of FinTech and its implications so as to review the regulatory framework and respond to the dynamics of the rapidly evolving FinTech scenario. More importantly, it will offer new and/or emerging technology, as well as utilize an already existing tech but in a more innovative way.

"The RS provides an environment to innovative technology-led entities for limited-scale testing of a new product or service that may or may not involve some relaxation in a regulatory requirement before a wider-scale launch", it said.

There is a huge advantage to operating a sandbox.

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The RBI further added that the focus of the sandbox will be at innovations, which have an absence of governing regulations; a need to temporarily ease regulations for enabling the proposed innovation; or is expected to effect the delivery of financial services in a significant way. Detailing the "innovative technologies" given the green light to apply for sandbox testing, the RBI lists blockchain platforms along with mobile-based payment and digital identity software, data analytics, and artificial intelligence or machine learning applications. Even though this move is in order to increase flexibility and dynamism in the sector, the condition 6.3 of the document is a clear setback to one of the areas which is indeed showing some of the greatest developments when it comes to innovation. The same thing can be said for applications that have something to do with smart contracts. Indian crypto proponents took to Twitter to express their disappointment with the RBI's decision. These include cryptocurrency or crypto asset services; crypto trading, investing or settling; or initial coin offerings, as well as a few more traditional financial services, according to the document.

Looking down at crypto-related projects is nothing new to the RBI.

"A regulatory sandbox (RS) usually refers to live to test of new products or services in a controlled/test regulatory environment for which regulators may (or may not) permit certain regulatory relaxations for the limited objective of the testing".

While the document further gives details about how the regulatory sandbox would work, exclusion of cryptocurrencies has definitely made the crypto followers in the country completely unhappy.

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