Think Tank Advises Sandbox Approach For Crypto Currencies; Know What It Is

Investing in various sectors is gaining popularity in India, with people diversifying their portfolios across fixed deposits (FDs), stocks, gold, real estate, mutual funds, and the emerging trend of cryptocurrency. Cryptocurrency, a virtual form of currency designed to facilitate transactions stored in a computerised database, is gaining traction in India’s investment landscape. The Global Trade Research Initiative (GTRI), an economic research institute, has proposed the establishment of a ‘regulatory sandbox’ to address issues related to crypto products and services in India.

A regulatory sandbox involves live testing of new products or services, such as cryptocurrencies, in a controlled regulatory environment. Regulators may grant specific exemptions for testing purposes. GTRI suggests that considering the growing adoption of crypto in the traditional financial system of the United States, India should explore regulatory sandbox approaches to balance innovation and risk management. Observing the evolution of India’s crypto policy is crucial, given the potential impact of crypto on global cash flows, gold prices, and foreign commerce.

The economic research institution emphasised the need for regulations in the face of the flourishing crypto landscape in the United States. The report suggests, “India may consider adopting regulatory sandbox approaches, allowing for controlled testing of innovative crypto-related products and services. It may need to balance innovation with risk management and adapt advancements in blockchain technology.”

Addressing a critical concern, the report highlights that any strategy must grapple with the anonymity of cryptocurrencies, which could potentially be exploited for illegal activities such as money laundering or supporting criminal organisations. Notably, current US regulations do not comprehensively tackle this crucial issue.

Despite the challenges, India has an existing crypto market facilitated by peer-to-peer trading and offshore exchanges. However, this unregulated landscape poses risks, lacking official safeguards. GTRI’s recommendations underscore the importance of carefully navigating the evolving crypto landscape, emphasising the need for a regulatory framework to manage risks while fostering innovation in the cryptocurrency sector.

The coming months will be crucial for India as it shapes its approach to cryptocurrency regulation, keeping in mind the lessons and experiences of countries like the United States.