The research and development branch of RBI (Reserve Bank of India), the Institute for Development and Research in Banking Technology (IDRBT), is reportedly developing a model using blockchain technology to help evolve the banking services. Despite a bitcoin ban, the country’s premiere bank leveraging on the very tech behind cryptos has raised several eyebrows.
This blockchain platform that is set to launch next year would be able to host a number of blockchain applications. The blockchain research and development program is being launched with an intention to stay on top of the technology and bringing the applications of blockchain into banking. Talking to an Indian news outlet, Business Line, AS Ramastri, Director of IDRBT, announced the launch of this project:
We have been working on a model platform for blockchain applications for the government in banking. It will be documented and developed next year.
Still seeming a little hesitant about the approach of bringing the arch enemies blockchain and banks together, the director stated:
While there is huge scope for deployment of blockchain applications, a cautious approach is very much needed.
For further growth of the banking system, RBI is also partnering up with fintech startups as they believe that co-innovation with such startups can bring new technologies on board. As the new fintech companies are shaping the financial industries they can add a lot of value to the banking systems.
The relationship of banking systems with crypto, however, have been tense for the past year or so ever since RBI issued a circular that ordered individuals holding and trading such cryptocurrencies to cash out into fiat as there is “risk” involved in these digital markets.
This introduced a huge regulatory uncertainity regarding cryptocurrencies as the banks were no longer allowed to partner with anything remotely linked to cryptos, especially crypto exchanges. Loans, money transactions, and accounts have been banned for exchanges ever since and trading volumes in India have dropped hugely.
The consequences of the boycott of crypto by banking services led to the shut down of exchanges across India. The recent and most notable one was the demise of one of India’s fastest growing and respectable exchanges, Koinex. As an announcement of the incident, Koinex posted a farewell tweet:
We’ve to regretfully inform all our users that we’ve decided to permanently disable all digital assets trading services on all Koinex platforms from 2 PM IST today (27th June 2019). Please read the announcement blog from our co-founders here: https://t.co/AVaHppwgEJ
— Koinex (@koinexindia) June 27, 2019
They even explained their recent state of misery in their blog post where they stated:
“Even for non-crypto transactions like payment of salary, rent and purchase of equipment, our team members, service providers and vendors have had to answer questions from their respective banks — just because of an association with a digital assets exchange operator.”
To avoid bankruptcy due to the exponentially decreasing trading volumes, Koinex decided to shut down respectfully with an opportunity for all the users to cash out.
The use of cryptos might be a threat to the centralized banking systems, but it surely can help these systems evolve and grow to become better with secure transactions. The recent partnership of MoneyGram, one of the biggest money transmission networks, with Ripple speaks volumes in this case. They partnered up to form a product called xRapid.
The conventional methods usually take $30 for transferring while they take 15 minutes to an hour to process the transaction. As opposed to this, xRapid would provide a platform where currency would be changed to XRP and upon reaching the other side, it would turn to the original currency, consequently saving a lot of time and effort for updating databases.
With the advancements and flourishing crypto industry tied with the bull market, mass adoption is just around the corner as big institutions are partnering up with cryptos, like Facebook. It would be safer to assume that the day is not far away when the banks would be pushed to include cryptos in their everyday operations.