India’s central bank opens blockchain division
The Reserve Bank of India (RBI) has been running a blockchain division since July, according to local media citing anonymous central bank sources.
The English-language Economic Times told how the RBI has allocated resources for a new unit to study the applications of blockchain’s data structure, along with investigating how artificial intelligence could speed up and automate mostly manual processes.
The Times source reportedly said: “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.”
No officical statement was forthcoming from the RBI.
As we reported in July, so far the government in India has taken a mostly hostile stance towards cryptocurrencies. In April the RBI issued a directive to the country’s banks telling them not to deal in cryptocurrencies. This monetary policy statement from the same month underlines the idea that the central bank is interested in blockchain and distributed ledgers but has no faith in Bitcoin.
“[The] Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins…it has been decided that with immediate effect entities regulated by RBI shall now deal with or provide services to any individual or business dealing with or settling virtual currencies.”
“Technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system. However, [cryptocurrencies and cryptoassets] raise concerns of consumer protection, market integrity and money laundering, among others.”
A deadline to shutter all cryptocurrency accounts with local banks came into force in July.
As a result, India’s largest cryptocurrency exchange Zebpay was forced to urge customers to withdraw their fiat rupees from the platform.
Legal challenges are afoot. The Supreme Court will meet in September to determine to what extent, if any, the government should support ICOs, licence cryptocurrency exchanges and offer protections for investors on the buying and selling of cryptocurrencies in India.
Bitcoin and blockchain, the technology that underpins all cryptocurrencies, are taking divergent paths.
Central banks are investigating how they might use blockchain-based products to speed up their processes but have less of a controlling entry point into cryptocurrencies, which tend to be held either by the developers of a particular currency or large investors.
The countries which have forged ahead with the most liberal legal frameworks for cryptocurrencies tend to be those either with a relatively low GDP and low population tax base like Jersey or Malta, or those associated with secretive and business-friendly tax regimes such as Switzerland, the British Virgin Islands, and Vanuatu.
The Hong Kong Market Authority central bank is one among many pushing ahead with blockchain-based trading platforms with traditional banks.