Until the last moment India has very intense relationship with cryptocurrencies and the underlying blockchain technology. While the rest of the world was actively testing a disruptive scheme to boost the various facets of financial sector, India remained uncertain on its crypto-attitude.
A picture began to clarify in February this year, when India’s finance minister Arun Jaitley mentioned a cryptocurrency during his budget speech. Mostly he recognized the benefits behind the digital technologies and stated a direction the government is to take for ushering innovation economy.
Nevertheless, Jaitley also said that the government as well as the central bank of India do not consider cryptocurrencies as a legal tender or coin, therefore individuals and organizations involved into crypto-business were prohibited to receive banking services. The finance minister commented on such a motion citing the government’s intention to prevent malicious activities pertaining to digital assets.
Following the ban several major cryptocurrency exchanges operating in the country have filed a petition to the Supreme Court of India. The final decision is expected on September 11, 2018. In the same month, regulators are also expected to be ready with the final draft of the cryptocurrency regulation laws.
Yet recently it became known that the Reserve Bank of India has revised the policy towards cryptocurrency treating. Holding back on a formal announcement, the RBI has secretly formed a new unit within the central bank to beef up its own intellectual capital in the face of emerging technologies like cryptocurrency, blockchain and artificial intelligence.
The unit has been operational for a month running by an appointed chief general manager whose name is undisclosed, according to the report of two sources familiar with developments at the central bank.
Further the source added that the new unit was conceived to research and possibly draft rules and supervise new emerging technologies in the future:
“As a regulator, the RBI also has to explore new emerging areas to check what can be adopted and what cannot. A central bank has to be on top to create regulations. This new unit is on an experimental basis and will evolve as time passes.”
The RBI decision has immediately sought public endorsement, since a vast majority of analysts named an investment into the development of blockchains and AI as the right thing to do at a time when new technologies are set to change business models.
Notably the central bank has been involved in this emerging technology for quite some time. Last September, AS Ramasastri, Director of the RBI’s research arm, the Institute for Development and Research in Banking Technology (IDRBT), said that the institute was developing a blockchain-based platform for handling different banking-related applications.
As indicated by a report published by the RBI in February, the IDRBT has already tested a proof-of-concept for settling trade finance transactions via a distributed network, with participants including banks and payment vendors.