Reserve Bank of India urged to rethink crypto ban in regulatory sandbox

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Crypto lobby groups and startup founders in India are urging the Reserve Bank of India (RBI) to reconsider its ban on cryptocurrency-related products from being tested in the proposed regulatory sandbox framework.

Nasscom, a trade association of IT companies in India, has asked the banking regulator to rethink the decision it announced in May on the suggested sandbox, The Economic Times reported. In its draft proposal, RBI is allowing blockchain-based projects to be tested in the sandbox, but cryptocurrencies, initial coin offerings (ICOs) and exchanges remain prohibited.

Nasscom believes that by allowing crypto-related projects to be tested in the regulatory sandbox, authorities in India will gain better understanding of the risks, as well as benefits, associated with crypto assets.

“Since crypto coins and tokens are an essential component of the blockchain technology, the draft regulations appear to exclude testing of smart contracts and other approved blockchain technology under the sandbox,” Nasscom said, adding, “The decision to keep cryptocurrencies, trading of cryptocurrencies and initial coin offerings out of the purview of the regulatory sandbox is still not clear.”

Incrypt Blockchain founder Nitin Sharma also commented: “Our research suggested that by restricting access to certain qualified digital asset startups, India could allow experimentation without worrying about any significant risks.”

The Payments Council of India (PCI), one of the lobbying groups fighting to have crypto assets included in the Sandbox, warned that the sandbox’s significant exclusions would only hinder innovation in the country. Naveen Surya, chairman emeritus of PCI, stated: “The boundaries can’t be defined right away. The discussion has been on how an open framework can be created instead of a subset of existing laws because then we wouldn’t be achieving the innovation objective.”

Authorities in India have stayed adamant in their fight against cryptocurrency. Even with the pending Supreme Court judgment, a draft bill that seeks to ban cryptocurrency completely was reportedly circulating among different departments in India.