This new document from the Reserve Bank of India is less than an outright condemnation of cryptocurrency even while it points to officialdom thinking that way. Other actions also rather show the official disapproval of the new technology. And who knows, they might well be right. It’s not obvious or even apparent that there’s anything in cryptocurrency that is of great use to anyone.
That doesn’t mean that a ban is justified – there are plenty of things which are of no great use which we don’t ban, vide Simon Cowell. The argument is that only if there is significant third party harm can we ban and that harm must indeed be significant – vide Simon Cowell. The mere production of bad music to assail our ears is not significant enough.
So, the general attitude should be unless there’s reason to ban, allow to continue. But here, from the RBI, we’ve something a little different. They are discussing a regulatory sandbox. That is, a privileged space for new products to be tested out there for real in the economy without the burden of full and strict regulation. Let’s see how they work before insisting they agree with every babu in the country. Access to such privilege is based upon at least the possibility of the public good. It’s this stricter test that crypto doesn’t pass:
The explanation of the criteria of the RBI seeks to protect the legacy techs and services. The RBI mentions that according to its view, crypto currencies bring nothing new to the country’s financial system, so they do not deserve to be taken into account by the regulatory sandbox.
That seems fair enough when it’s properly explained.
The Indian government does not recognize cryptocurrencies as legal tender. Last year the Reserve Bank of India prohibited banks from servicing clients engaged in crypto-related activities. The move effectively crippled the country’s blockchain-based businesses, causing Zebpay, India’s number one cryptocurrency exchange, to shutter its local operations and move to Malta.
It’s also true there’s that more general distaste for crypto in the regulatory apparatus but that’s different from this current point being made. Access to privilege should, arguably, only be on a presumption of societal benefit. The document itself is here:
3. Regulatory Sandbox: Benefits The setting up of an RS can bring several benefits, some of which are significant and are delineated below: 3.1 First and foremost, the RS fosters ‘learning by doing’ on all sides. Regulators obtain first-hand empirical evidence on the benefits and risks of emerging technologies and their implications, enabling them to take a considered view on the regulatory changes or new regulations that may be needed to support useful innovation, while containing the attendant risks. Incumbent financial service providers, including banks, also improve their understanding of how new financial technologies might work, which helps them to appropriately integrate such new technologies with their business plans. Innovators and FinTech companies can improve their understanding of regulations that govern their offerings and shape their products accordingly. Finally, feedback from customers, as end users, educates both the regulator and the innovator as to what costs and benefits might accrue to customers from these innovations.
Quite so. But again access to such privilege should perhaps be based upon an assumption of the new technology being beneficial. As cryptocurrencies are not. Allegedly not, at least.