Cryptocurrency trading was outlawed in India by the RBI in 2018. Photo: AFP

A Reserve Bank of India report says all cryptocurrency related activity will be excluded from the country’s new fintech regulatory framework. 

The report, that summarised government progress on creating a regulatory “sandbox” to allow “innovative technology-led entities” to live test products or services before full launch, has implicitly excluded all types of digital asset trading, storage and launches.

Cryptocurrency trading was outlawed by the Reserve Bank of India (RBI) in April 2018, with the Indian government, much like other Asian countries, repeatedly voicing support for blockchain while taking a cautious approach to digital currencies. The Supreme Court of India was scheduled to look at crypto regulation in March but, according to industry insiders, has now delayed its judgment at least until July.

Now, the central bank report, published on April 18th, bars any crypto-related trading, investing or settling services, and also any Initial Coin Offerings, from any future regulatory framework.

The Reserve Bank of India established a fintech working group in July 2016 to investigate the rapidly growing sector and to then report on recommendations to create a regulatory framework. In February last year, the group released a report that proposed introducing a framework for a “regulatory sandbox… where the financial sector regulator(s) will provide the requisite regulatory guidance,”

The so-called sandbox, said the Bank, would provide a platform to live test new products in a controlled environment. This would allow regulators to conduct financial risk analysis, and eligibility for inclusion would depend on current regulation plus the capacity of the product or service to foster further innovation in India’s fintech sector.

The latest central bank report claims that as cryptocurrencies bring nothing new to the country’s financial system, they therefore do not deserve to be included in the regulatory framework. 

Last year RBI banned banks from having any dealings with crypto exchanges or related services. This was to prevent individuals or organizations buying digital assets with fiat currencies. By severing the fiat-to-crypto path, the bank was essentially tightening the control it held over currency within the country.

The latest message from the RBI is just as clear. The list of services and products that will not be permitted in its new regulatory framework comprises primarily crypto based services and for now there will be no attempt to even consider regulating crypto services or including them in the fintech sector.

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