Reserve Bank of India: regulatory sandbox closed for crypto business

Posted 19 April, 2019

The Reserve Bank of India has published the draft framework for regulatory sandbox though with a proviso. In particular, the potential sandbox welcomes blockchain companies but cryptocurrency startups cannot take part in it.

RBI unveiled the press release on April 18 just after almost 3 years since the establishment of the task force to study fintech solutions.

The draft reads:

"The RS [regulatory sandbox] is potentially an important tool which enables more dynamic, evidence-based regulatory environments which learn from, and evolve with, emerging technologies...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. "

As the representative of RBI commented, the DLT and smart contracts are believed to be innovative areas in the country and they must be developed in the sandbox. 

At the same time, the draft contains also the list of the sectors for which the sandbox doors will be closed. 

"The entities may not be suitable for RS if the proposed financial service is similar to those that are already being offered in India unless the applicants can show that either a different technology is being gainfully applied or the same technology is being applied in a more efficient and effective manner," as explained in the document.

Cryptocurrencies have also been put in this list. This measure covers the crypto protocols and services connected with trading, investment or transactions.

It also should be mentioned that the bank refuses to work with ICO projects and even some traditional financial service providers as well. At the same time, RBI is focusing now on solutions for retail payments, money transmittance, digital identification, etc.

RBI has been always quite negative towards the cryptocurrencies. Specifically, it banned financial institutions in the country from providing services to companies or individuals that deal with cryptos. The crypto business naturally opposed such decision, though the court failed to go with them during the hearing of the petitions and complaints.

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