“You shall not Pass!” RBI to Cryptocurrency-projects

The RBI had recently announced the setup of a fintech sandbox to help create a safe testing ground for applications. This sandbox most likely will include blockchain startups and tools, but the RBI has explicitly excluded any crypto related projects.

Last Thursday, the central bank published a draft framework for the regulatory sandbox. “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,” the draft says.

Setting up the sandbox allows the central bank to better study and understand innovative technology while not stifling the growth of such technology as per the document.

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The draft classifies ‘application under blockchain technologies’ as an ‘innovative technology’ that falls under the parameters of the sandbox. But, as per the ‘Exclusion from Sandbox Testing’ subheading no crypto related products or services, crypto assets services, initial coin offering and a couple of more traditional financial services will be excluded from the sandbox.

Moreover, “Any products/services which have been banned by the regulators/Government of India” are excluded from the sandbox.

This exclusion of cryptocurrency projects was expected. The RBI has always frowned upon cryptocurrency projects; it banned financial institutions across India from providing any financial services to crypto startups.

The Supreme Court has asked the RBI to formulate a regulatory framework for crypto services which the court will review. We are unsure of when this framework will be published. Until such a framework is published, cryptophiles can rest assured that the RBI is at least welcoming of blockchain tools. It had reportedly launched a unit dedicated to researching regulatory framework for the same last August.