India is at an inflection point in fintech innovation. The countries’ government and policymakers have the opportunity to foster responsible adoption of new digital asset and blockchain technology by creating transparent, principles-based regulatory frameworks that support it.
In 2019, the United States was at a similar inflection point. Ripple CEO Brad Garlinghouse and Executive Chairman Chris Larsen penned an open letter to the U.S. Congress urging legislators to support fintech regulation that fosters responsible innovation and protects consumers. Since the letter was issued, various U.S. legislators, policy makers and regulators have taken steps to further address the benefits of blockchain technology, whether it be by rulemaking, guidance or statements of key officials. In a recent example, the U.S. Consumer Financial Protection Bureau (CFPB) announced a final rule that would revise the The Electronic Fund Transfer Act (EFTA) as it relates to remittance transfer providers.
Today, in an effort to provide Indian policymakers with similar recommendations, Ripple is releasing a policy paper “The Path Forward for Digital Assets Adoption in India.”
Recently, India’s Supreme Court delivered an historic verdict in the “Internet And Mobile Association of India (IAMAI) versus the Reserve Bank of India (RBI)” case, enabling millions of Indians to invest, buy and sell digital assets through bank accounts safely and responsibly—promising a new era for digital asset technology in India. The verdict offers policymakers the opportunity to develop a thoughtful and globally aligned regulatory framework for the digital assets ecosystem in India.
Ripple’s policy paper offers an overview of the global digital assets landscape and proposed measures policymakers may implement over the short and medium term to enact a comprehensive digital asset policy in India, including:
- Adopt a digital asset taxonomy consistent with global practice—providing clarity to the legal character of digital assets.
- Enact a facilitative legal framework for digital asset service providers at the Gujarat International Finance Tec-City (GIFT) in the short term—to attract mature global participants to GIFT for developing enterprise use-cases of digital assets.
- Modify RBI’s Regulatory Sandbox Framework to remove “cryptocurrency” and “crypto asset services” from the negative list—thereby offering service providers an opportunity to test the value proposition of this new technology in the Indian context.
- Implement a conducive regulatory framework for digital assets by amending specific financial sector laws—for example, empower the Securities and Exchange Board of India (SEBI) to license, regulate and supervise digital asset service providers.
Around the world, many governments and policy makers are working together to establish clear regulation. Regions, including the U.K., Singapore, Switzerland and Abu Dhabi have in place digital asset market frameworks that both support innovation and address risk. For example, the U.K. FCA recently issued a guidance classifying digital assets to provide regulatory clarity for market participants carrying on activities in this space.
Now is the time for India policymakers to take the forward-looking approach that many other jurisdictions have taken. Responsible usage of blockchain technology and digital assets can introduce tremendous potential to the Indian economy. Under a clear regulatory framework, consumers and businesses can confidently take full advantage of and operate within a safe environment that encourages the use of innovative technology.
We urge Indian policymakers to implement a regulatory framework that is technology-agnostic, principles-based and risk-adjusted. In the words of Garlinghouse and Larsen, “you have the world’s attention. Let’s come together and seize the moment.”
For more information about Ripple’s work to ensure payment innovations take root in safe and secure ways, visit Ripple’s Policy Framework page.
Joseph Spezzano received a Masters Degree in computer science from The University of Massachusetts. Joseph has been working as a full-time blockchain programmer for the past 5 years. In his spare time, Joseph enjoys writing for CryptocurrencyInvestments.com and traveling.