NEW DELHI: R Gandhi, the Deputy Governor of Reserve Bank of India, on Monday raised concerns about the prevalence of virtual currency, calling it prone to risks.
Addressing the FinTech Conference 2017 organised by FICCI, IBA and NASSCOM in Mumbai, Gandhi said that the virtual currency posed different types of threats like financial, operational, legal and security-related risks. “VCs [virtual currencies] being in digital form are stored in digital/electronic media and are prone to losses arising out of hacking, loss of password, compromise of access credentials, malware attack, etc,” he said.
Virtual currency, such as Bitcoins, is unregulated digital money, issued and controlled by its developers, which circulates among members of a specific virtual community.
Gandhi also raised issues of confidence and anonymity related to virtual currency. “A ‘currency’ should be able to sustain these two elements for ever; it will impair its exalted status once either of these elements gets affected,” he added.
Gandhi said that the trend about the elimination of cash and credit went back to 1950s and talks about the death of currency had always been fashionable.
“Has currency died? Is it dying? Or at least will it die? In all these years, you will find that currency has actually increased in absolute terms, not just in developing and emerging economies where penetration of banking and finance is not yet complete, but also in the developed economies,” he said.
While accepting that FinTech companies are reshaping the financial services industry radically, he added that the disruptive innovations of the FinTech could not wholly eliminate or completely decimate the traditional banking or finance.