The Reserve Bank of India announced the terms of its regulatory sandbox environment in its report on April 18. According to the terms of the sandbox, several applications of the blockchain technology can be tested. While the projects related to the cryptocurrency are clearly excluded.
Regulators around the world use test environments, including the Financial Conduct Authority of the United Kingdom, so financial technology companies can test their innovations with a small number of consumers over a period of time.
The testing of blockchain based innovative technology
Nearly three years after the RBI began reviewing its framework for responding to the rapidly evolving financial technology market dynamics. India’s central bank concluded that the public can test the blockchain based innovative technology. It gives the institution the opportunity to evaluate if new regulations are needed to protect consumers.
The RBI says that fintech companies and consumers also benefit from this agreement. While blockchain companies can prove the viability of a product without the need for a larger and more expensive implementation, the public could benefit from cost reduction and improved access to financial services.
However, the report admits that innovators may lose some flexibility and time when embarking on the testing environment process. And adds that completing these tests does not guarantee that, subsequently, no further regulatory approval will be needed.
By detailing the innovative technologies that receive the green light to request sandbox testing, the RBI lists the blockchain platforms along with digital identity and mobile payment software, data analysis and artificial intelligence applications or machine learning. Eligible sectors for innovative products and services include retail payments, money transfer services. Know your customer digital checks, smart contracts and cybersecurity products.
Allowance of cryptoactives
In addition to the cryptocurrencies, the platforms that allow the trading and investment of cryptoactives as well as the initial offers of currencies have been excluded. Products and services that are already prohibited by regulators or the government of India are also not eligible to apply.
Cointelegraph reported last April that the RBI said it would no longer provide services to people or businesses that deal with cryptocurrencies. Five months later, Zebpay, one of the largest cryptocurrency exchanges in India, announced that all trade had ceased due to extremely difficult conditions.
The Reserve Bank of India had been pursuing the idea of launching its own digital currency, but these plans were postponed at the beginning of the year. Amid growing uncertainty about the regulation of cryptocurrencies in the second most populous country in the world. In February, the Supreme Court granted the Indian authorities a period of four weeks to issue regulations or face the threat of the court issuing a ruling.