Reserve Bank of India sets up Fintech Regulatory Sandbox
Blockchain startups included cryptocurrencies not
Back in 2016 the Reserve Bank of India set up an internal review group to look into the regulatory framework for Fintech. Now two years later India is launching its regulatory sandbox and is including technologies such as Blockchain in the startups allowed to participate.
According to the information provided on the website of the Reserve bank, the objectives of the regulatory sandbox will be to live test new products and or services in a controlled test regulatory environment with some relaxations for limited purpose of testing. The regulatory sandbox will allow the regulator, innovators and financial service providers and customers to conduct field tests to collect evidence on the benefits and risks of new financial innovations while monitoring their risks.
Ofcourse not everyone can participate. The proposed financial service to be launched under the RS 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.
As per the announcement, areas that can potentially get a thrust from the RS include microfinance, innovative small savings and micro-insurance products, remittances, mobile banking and other digital payments. Coherts will be run, not more than 6 months, focusing on themes such as financial inclusion, payments and lending, digital KYC, etc.
As for what technologies will be accepted and in what use cases, the Regulatory sandbox will deal with innovations in retail payments, money transfer services, marketplace lending, digital KYC, financial advisory services, wealth management services, digital identification, smart contracts, financial inclusion products, cyber security products, and innovative technology, APIs and applications under blockchain technologies, AI, machine learning applications
Those who will not be accepted into regulatory sandbox include credit registry, credit information, cryptocurrency, crypto assets services as well as trading investing and settling in crypto assets, ICOs, chain marketing services,
The Regulatory sandbox will commence testing process with 10-12 selected entities. These entities have to be registered in India meet the criteria of a startup, viable product, compliant and highlight an existing gap in the financial ecosystem and should demonstrate that there is a relevant regulatory barrier that prevents deployment of the product and service at scale.