The Reserve Bank of India has declared some of the terms of the regulatory sandbox in a report on April 18. According to the Sandbox, different applications of Blockchain Technology can be tested, however, Cryptocurrency-related projects are highly excluded.
Sandboxes are used by various regulators around the globe, including Financial Conducting Authority in the UK. Hence, it enables various fintech firms to test with a small number of consumers over a particular time.
The Reserve Bank of India(RBI) released its data framework for the regulatory sandbox on Thursday, a move which comes just after three years it established a working group to look into the cryptocurrency-related projects. India's central bank has developed an "innovative technology" on the blockchain that can be sampled by the public. Thus, giving the institution the right to access whether the latest regulations are required to protect consumers.
The report says,
"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."
Operating a Sandbox enables RBI to properly understand blockchain technology, along with carrying on the Innovation, as per the document.
The RBI mentions that the fintech firms and consumers take great advantage from this regulatory sandbox. This allows blockchain firms to "test product's viability without any requirement of a huge and more expensive roll-out." Also, the public can take advantage of "reduced costs and improved access to financial services."
The report further claims that the innovators might lose some flexibility and time initiating by starting on the sandbox process, and states that finishing these tests doesn't ensure that the further regulatory approval will be needed.
But keep in mind that Sandbox will not consider any of the Crypto-related products. This consists of crypto-related services such as Initial Coin Offerings and some of the traditional financial services as per the document.
RBI has approved sandbox testing for all the "innovative technologies" such as blockchain platforms including mobile-based payment and digital identity software and data analytics, or AI or machine learning apps. Some of the sectors in this include retail payments, money transfer services, digital identity, mobile payments, and the financial institution, as per the draft.
RBI is checking various cryptocurrency projects, banning Indian banks from doing business with the crypto startups last year after granting various warnings for such activity.
Various Local Startups have raised petitions for removing the ban, and the Supreme Court of India is looking after the matter. It is not known when the final decision will be rolled-out.