India is at a turning point in fintech innovation. The country’s government and policy makers have an opportunity to encourage the responsible adoption of new digital asset and blockchain technologies by creating transparent, principle-based legal frameworks that support it.
In 2019, the United States was at a similar turning point. Brad Garlinghouse, CEO of Ripple, and Chris Larsen, Executive Chairman, penned an open letter to Congress calling on lawmakers to support fintech regulation, encourage responsible innovation and protect consumers. Since the letter was published, various U.S. lawmakers, policymakers, and regulators have taken steps to further investigate the benefits of blockchain technology, whether through rule-making, guidance, or testimony from key officials. In a recent example, the United States’ Bureau of Consumer Financial Protection (CFPB) announced definitive rulings to revise the Electronic Funds Transfer Act (EFTA) in relation to wire transfer providers.
To make similar recommendations to Indian policymakers, Ripple is today releasing a strategy paper entitled “The Path to Digital Asset Adoption in India”.
Recently the Supreme Court of India issued a historic judgment in the Internet and Mobile Association of India (IAMAI) v Reserve Bank of India (RBI) case that enables millions of Indians to securely and securely hold digital assets through bank accounts investing, buying and selling responsibly – promises a new era for digital asset technology in India. The ruling provides an opportunity for policy makers to develop a thoughtful and global legal framework for the digital asset ecosystem in India.
Ripple’s strategy paper provides an overview of the global digital asset landscape and the proposed actions policymakers can implement in the short and medium term to adopt a comprehensive digital asset policy in India, including:
- Introduction of a taxonomy for digital assets that corresponds to global practice and creates clarity about the legal character of digital assets.
- Short-term implementation of a legal framework for digital asset service providers in Gujarat International Finance Tec-City (GIFT) to attract mature global participants to develop corporate digital asset use cases for GIFT
- Modify RBI’s regulatory sandbox framework to remove “Cryptocurrency” and “Crypto Asset Services” from the blacklist, and allow service providers to test the value proposition of this new technology in the Indian context.
- Implement a conducive legal framework for digital assets by amending certain financial sector laws. For example, enable the Securities and Exchange Board of India (SEBI) to license, regulate and oversee digital asset service providers.
Many governments and policymakers around the world are working together to achieve clear regulation. Regions such as the UK, Singapore, Switzerland and Abu Dhabi have frameworks for the digital asset market that both support innovation and counter risk. For example, the UK’s FCA recently issued a guide to the classification of digital assets to provide regulatory clarity for market participants active in this area.
Now is the time for Indian policymakers to take the forward-looking approach that many other jurisdictions have taken. Responsible use of blockchain technology and digital assets can give the Indian economy enormous potential. Under a clear legal framework, consumers and businesses can take full advantage of a safe environment that encourages the use of innovative technologies and work in a safe environment.
We urge Indian policymakers to introduce a regulatory framework that is technology-independent, principle-based and risk-adjusted. In the words of Garlinghouse and Larsen, “You have the world’s attention. Let’s get together and seize the moment.”
For more information on Ripple’s work to ensure payment innovations take hold in a safe manner, please visit the Ripple Policy Framework page.