April 19, 2019 | AtoZ Markets – India’s Central Bank, the Reserve Bank of India (RBI) has released the terms for its regulatory sandbox. The terms of the sandbox include several applications which are related to blockchain technology but all cryptocurrency-related projects seem to have been excluded.
Indian FinTech regulatory framework
According to an official report released by the Reserve Bank of India on 18th April 2019, on what is called to as the “Regulatory Sandbox”, which explores different aspects of Indian FinTech regulatory framework.
The main reasons for their publication is to educate the investors and is a follow-up of a first draft that was released on 8th February 2018 when the public was given an opportunity to give their feedback. Regulatory Sandbox is supposedly one of the main recommendations that were gathered from many comments.
The regulatory sandbox will provide FinTechs with “an environment to innovative technology-led entities for limited-scale testing of a new product or service.” The companies will be able to “test the product’s viability without the need for a larger and more expensive roll-out.”
Rapidly growing Indian Fintech market
Sandboxes are normally used by financial regulators worldwide to enable Fintech companies to put their innovations to test using a smaller number of consumers over a pre-agreed upon time period. India’s RS comes about three years after the RBI reviewed its existing framework in response to the dynamics introduced by the rapidly evolving Fintech market. According to the RS, India’s Central Bank concludes the “innovative technology” the public can sample build on blockchain technology, giving institutions an opportunity to assess whether there is a need for new regulations to protect consumers.
Moreover, the regulatory sandbox doesn’t entertain any crypto-related projects including cryptocurrencies or crypto asset services, crypto trading, investing or settling or Initial Coin Offerings (ICOs) besides several other more traditional financial services. As per the document, the Central Bank is interested in projects relating to retail payments, money transfer services, digital identity, mobile payments, and financial inclusion.
Indian Supreme Court is reviewing the matter
The RBI has for a long time had a negative stance towards cryptocurrencies and barred Indian banks from offering banking services to any business or individuals trading in cryptocurrencies last year after giving several warnings. Local startups filed petitions to push back the ban and the country’s Supreme Court is reviewing the matter and it’s not yet clear when the final decision will be delivered.
The RBI, which has shown a bias towards blockchain, launched a unit dedicated to research on the regulatory framework for blockchain last August. There was information that the RBI was pursuing releasing its own digital currency but the plans were put on hold at the beginning of the year. The Supreme Court gave Indian Authorities a four-week deadline last February to create regulations or face the threat of the court releasing a judgment themselves.
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