The Reserve Bank of India (RBI) has rolled out what it termed a ‘Draft Enabling Framework for Regulatory Sandbox,’ that will serve as a requirement guide for the burgeoning fintech sector.
In 2016, in response to the rapidly growing fintech space, the RBI set up a committee (Inter-Regulatory Working Group on FinTech and Digital Banking in India) tasked with the responsibility to ascertain the implications of the evolving space and advise on an appropriate regulatory framework. A ‘regulatory sandbox/innovation hub’ was one of the recommendations of the working group following their findings. The RBI has finally developed a test environment to increase efficiency, manage risks and create new opportunities for consumers with respect to fintech innovations.
According to the press release:
“The proposed financial service to be launched under the RS (regulatory sandbox) 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.”
While it does seem like the financial regulator thinks to promote the innovative stems of the fintech industry to include applications under blockchain and smart contracts, however, it did clearly state that cryptocurrency and initial coin offerings – both essential components of the decentralized blockchain – will be excluded from the test environment.
This would come off as bad news to crypto ventures in the country as they have been waiting desperately to resume their crypto-related activities – to include trading of cryptocurrencies to fiat counterparts – without incurring further sanctions from the watchdog.
The Indian government has been mulling over cryptocurrency regulations and sought external help to formulate a befitting legislature for the industry, and earlier in February, a report suggested stunting the growth of cryptocurrency may have negative feedback to the nation.
In the month of March, a protest was carried out by Indian crypto enthusiasts across 4 major cities expressing their dissatisfaction on the state of the industry, as crypto regulations are in their final stages. With the exclusion of cryptocurrency testing in the regulatory sandbox, it remains unseen how the crypto community will react en masse to the development.
Overall, the RBI’s sandbox development as with other jurisdictions bodes well for the fintech space as it joins the race for inclusion in the emerging market.
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