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The Reserve Bank of India has created a new division committed to emerging technologies, including blockchain, cryptocurrencies, and Artificial Intelligence. The unit aims to conduct research into these technologies and help regulate the ecosystem.
India’s central bank has operated this division for about a month now. An official announcement was not made prior to its establishment; therefore the bank wants to tread cautiously, especially when it comes to emerging technology ecosystems like the blockchain and cryptocurrencies.
Though the unit currently doesn’t have a leader, someone would be selected to lead operations as time goes on. The bank, therefore, hopes to take things slowly and make sure that it undertakes a variety of experiments on regulations before any big move. According to the economic times,
“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.”
RBI’s History on the Blockchain
India’s central banking institution, the Reserve Bank of India has a positive history with the blockchain technology. By January 2017, the bank’s Institute for Development and Research in Banking Technology (IDRBT) wing had already completed the test of a blockchain-based, proof of concept (PoC) solution for trade finance applications.
The initiative, which was built in partnership with New York-based MonetaGo, a startup that focuses on leveraging private blockchains to build inter and intrabank payment solutions, saw many other banks, solution providers, and the National Payments Corporation of India (NPCI) all come together. Director of the Institute for Development and Research in Banking Technology (IDRBT) A.S Ramasastri also announced in June 2017 the bank’s plans to launch a blockchain platform, showing the bank’s growing interest in distributed ledger technologies.
Though the bank has been interested in the blockchain technology, it hasn’t entirely welcomed cryptocurrencies with a favorable eye. During bitcoin’s meteoric rise around December 2017, the bank warned cryptocurrency investors of operational and financial risks, banned financial institutions from dealing with cryptocurrencies, as well as legal and security implications associated with these digital currencies.
Innovate or Become Irrelevant
Though the Reserve Bank of India has not enacted laws to regulate cryptocurrencies, its central bank has publicly stated they are experimenting with the blockchain. It’s only a matter of time before the country’s central bank catches up with other central banks using distributed ledger technologies to create solutions for the financial services industry.