India’s Central Bank Sets up a Blockchain Unit

The new department will work to strengthen the knowledge of the Reserve Bank of India on new and emerging financial technologies.

Amid the continuing cryptocurrencies controversies and trading ban in India, the country’s central bank has set up a blockchain unit.

According to a report from The Economic Times news outlet, the Reserve Bank of India (RBI) set up a unit focused on blockchain and artificial intelligence about a month ago. The goal of the new department is to beef up the c-bank’s knowledge on the emerging financial technologies and possibly draft regulations and rules for them in the future.

“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,” a source told The Economic Times. 

So far, only a chief general manager has been appointed, but no official announcement on the unit has been made.

Despite the lack of official information, the move has been welcomed by analysts who noted the RBI was doing the right thing.

“Unless regulators are part of the ecosystem, they understand and have a clear indication of what is accepted and what is not, it can neither protect the industry it regulates nor the consumers who use it,” said Piyush Singh, managing director-financial services, Asia Pacific and Africa, at Accenture, told The Economic Times.

Cryptocurrency trading is currently, at least in theory, banned in India by the RBI, which forbade commercial banks from providing any services to cryptocurrency trading companies or making transactions related to cryptocurrency buying and selling. The de-facto ban was challenged in court, but was upheld by India’s Supreme Court in July.

On the other hand, the authorities seem to be not as averse to the underlying blockchain technology as they are to cryptocurrencies and the government is looking into several projects. Commercial banks are also exploring the opportunities provided by blockchain technology for inter-bank transactions.