India’s central bank has created a dedicated department for fintech challenges, which includes a pair at their doorstep: framing cryptocurrency regulations and a Central Bank Digital Currency (CBDC).
The move by the Reserve Bank of India (RBI) comes a fortnight after CoinDesk had reported about India’s framing of crypto regulations saying that “while the RBI is adequately staffed with specific departments to discharge these tasks, it still does not have a fintech department, just a division, leaving questions about efficiency and long-term commitment unanswered.”
The RBI is working on two types of CBDCs, wholesale and retail, and the new department will now be tasked with overseeing their development. Meanwhile, India’s parliament is set to consider regulations of cryptocurrencies. The RBI has unsuccessfully tried to “prohibit” banks from dealing with crypto exchanges in the past.
The new department will be overseen by Ajay Kumar Choudhary who was appointed by the RBI as executive director, saying he “will look after Fintech Department, Risk Monitoring Department and Inspection Department.”
“You can expect much more action from Mr. Ajay Kumar Choudhary towards the Central Bank Digital Currency. This may signify a shift from the RBI’s stance towards fast tracking CBDC piloting,” said a source with knowledge of the matter.
The move is a long-in-coming recognition by the RBI to allocate resources and dedicated focus to the fintech sector. Experts had long complained that India’s institutions did not have an adequately equipped and dedicated team focused on fintech challenges such as the burgeoning crypto-sphere in India.
“It’s a positive signal of intent to build real regulatory capacity to oversee the fast-paced fintech industry,” said Vivan Sharan, a technology and policy expert who has worked with the government in the past.
“It is also a reflection of the central bank’s desire to deepen digital payments through a focus on innovation, and a recognition of the growing importance of various forms of digital money that will require supervisory bandwidth,” Sharan said.
In June 2018, the RBI had formed a FinTech Unit in the Department of Regulation for acting as a central point of contact in the bank for all activities related to fintech.
According to an internal administrative circular viewed by coindesk, the upgrading of that unit into its own department is aimed at promoting innovation in the sector, identifying the challenges and opportunities associated with it and addressing them in a timely manner, and providing a framework for further research on the subject that can aid policy interventions by the bank.
“All matters related to the facilitation of constructive innovations and incubations in the Fintech sector, which may have wider implications for the financial sector/markets and falling under the purview of the Bank, will be dealt with by the FinTech Department,” said the document.