With the advent of blockchain technology and its innumerable applications in the field of finance, many of the regulating authorities in the banking sector have taken initiative to support the integration of blockchain systems. Recently, it was reported that one of the most authoritative banks in India, the central bank of India, has set aside a special unit in order to research and develop blockchain solutions. The team is tasked with the responsibility to execute the operation of the development of these digital assets, blockchain and artificial intelligence applications that might aid the utility of banking services in various areas of India.
Blockchain is relatively new to the masses, and its incorporation all over the world might take more than a few years. It is logistically not feasible for all areas in the country to be able to utilize its power. The experimental unit dedicated to research of blockchain has to introduce a seemingly complex system in a way that would promote interoperability between the existing projects and remove barriers to employ a completely decentralized system. According to the economist,
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.
It was further reported that the unit is only a month old right now. A chief manager is currently acting as its lead. No formal announcements have been made yet about its course of action. Media outlets have not received any response from the team regarding this particular matter either. The analysts have been regarding this as a very important contribution on the part of RBI. In order for the fintech to be regulated, the law makers or the regulators have to be a part of the ecosystem, to recognize all potentials threats and hurdles in the deployment of a brand new tech. Piyush Singh, managing director-financial services; Asia, Pacific and Africa, at Accenture expressed his opinion over this saying,
Unless regulators are part of the ecosystem, they understand and have a clear indication of what is accepted and what is not, it can neither protect the industry it regulates nor the consumers who use it, this is true specially in the financial world where paper-based regulations are a passé’ due to the onset of digital technologies. It is extremely important and the right thing to do from RBI’s perspective.
The creation of this unit has been preceded by other plans of setting up data science laboratories, maintained by experts in the field of computer science, data analytics, statistics, economics, econometric and finance. It was also announced in the April’s monetary policy that these professionals will also be tasked with creating RBI functions like inflation targeting, banking regulations and policy enforcement. It was reported that the ideas have only come to life after Governor Patel took charge of these operations.
The Central Bank has taken initiative to conduct research in this field having criticized the trade of cryptocurrencies within the borders of India by issuing a warning against the trade of these tokens. All the financial institutions were ordered to halt the provision of all related services to businesses and individuals dealing in cryptocurrencies. An official ban was imposed in July, which was challenged in court by some representatives of crypto industry. Albeit, the supreme court has not granted a stay against the ban and the final hearing for this case is to be conducted on September 11.
The Indian officials have also been working to produce a regulatory framework for cryptocurrencies. Their release was scheduled in July but was later postponed. The framework will now be presented in September.
To conclude, the formation of this unit has ensured that efforts are being made in India to gear up for the forthcoming reforms in the field of blockchain that would revolutionize fintech as we know it. The big question looming over heads right now is that will the courts give their assent to regulating blockchain and its application, or will it be shunned like it has been in its neighboring country, China?