Cryptocurrency Businesses Excluded from RBI Fintech Regulatory Sandbox, Blockchain allowed
The Reserve Bank of India (RBI) has released its much anticipated fintech regulatory sandbox but with one notable exception – cryptocurrency startups. Once again, India’s central bank exhibits its apathy for cryptocurrency-related projects.
Cryptocurrency Remains Anathema in India
In a draft proposal published on Thursday (April 18, 2019), the RBI spelled out modalities for fintech firms to participate in the regulatory sandbox. The report comes three years after the apex bank first announced that it was developing protocols to regulate fintech companies.
The exclusion of cryptocurrency-related projects is one of the major highlights of the report. Among the excluded fintech firms are cryptocurrency exchanges and brokerages, as well as initial coin offerings (ICOs).
The absence of cryptocurrency-related projects from the list of approved fintech firms is yet another cause for worry among crypto enthusiasts in the country. Back in 2018, the RBI banned banks from facilitating cryptocurrency transactions.
While crypto might be anathema to regulators in India, the case is the opposite for blockchain startups. According to the report, blockchain startups can use the regulatory sandbox to test the viability of their products to a select group of users on the road to a much larger roll-out to the general public.
While cryptocurrencies are all but banned in India, the government continues to recognize and encourage blockchain technology solutions. In late 2018, the government of Karnataka in the southwestern part of the country announced plans to deploy a blockchain-based platform for the protection of intellectual property rights.
Cryptocurrency Businesses in India Forced to Shutter
Since the RBI ban, a couple of cryptocurrency exchanges in the country have been forced to shut down. Some have moved their operations to crypto-friendly countries like Malta.
Meanwhile, industry stakeholders continue to challenge the legality of the RBI ban. There is a pending matter before India’s Supreme Court that has failed to reach a conclusion due to delays from the government and financial regulators.
Commercial banks in the country are even taking matters a step higher by trying to stifle cryptocurrency transactions in other ways. Earlier in the year, reports emerged of banks closing accounts of their customers who trade in cryptocurrencies.
Critics of the regulator’s position say such actions will derail India’s ability to take a foothold in the developing digital economy. They point to softening restrictions in other countries that look to encourage growth and development within the cryptocurrency industry.
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