In response to the growing innovation in several aspects of financial technologies and the existing regulatory legal framework to account for them, the Reserve Bank of India has decided to take a regulatory framework sandbox approach, the first draft of which was published on 18 April.
The intention behind using the regulatory sandbox approach in India is to promote more innovation in the spheres of Fintech. It identifies certain kinds of innovations where either presently no regulations exist or needs relaxation.
Also, the innovations should promise of significantly affecting the delivery of financial services. It is on this basis that the draft framework has presented an indicative list of technologies which will be dealt with by the framework. However, this list does not include cryptocurrency or related services.
India’s favorable FinTech technologies and products
Retail payments, digital KYC, and wealth management financial advisory services are some of the products included in the list. There are certain technologies which the list has favorably mentioned, like Data Analytics, Artificial intelligence, Machine Learning technologies, and Mobile Technology Applications. Smart contracts and blockchains too are part of the list.
The blacklist of Cryptocurrency and ICO projects
The draft, however, has clearly provided another indicative list of unfavorable products. The list consists of cryptocurrency or crypto asset services, ICOs, and crypto trading services to name a few.
The exclusion of the crypto related services by the RBI can be seen in the context of the continued hostile attitude of the regulatory body towards cryptocurrencies. This attitude of the RBI had been depicted in a notification by the regulatory authority to the banks, instructing them to seize providing services to any institution or entity dealing in cryptocurrencies. The crypto start-ups in India had moved to the Supreme Court against this notification, and the court is presently overseeing this issue. Meanwhile, due to the losses incurred many crypto trading platforms, like Coindelta have shut their doors.