https://rbi.org.in/SCRIPTS/BS_SpeechesView.aspx?Id=971While the title of the paragraph may not be very nice, the rest of the consideration does point towards a pretty decent path forward for Crypto in India.
Undesirable and Questionable Disruptive Innovations
30. While so far we have discussed certain disruptive innovations which we support, we also need to discuss certain other innovative developments which have the potential to be disruptive of course, but not of so desirable, or of questionable, relevance, or at least we need to be carefully monitoring and be vigilant. In particular, I want to discuss two developments – digital money or crypto currency and crowd funding.
31. What is crypto currency? Crypto currency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.
32. What is crowdfunding? Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet. Crowdfunding is a form of alternative finance, which has emerged outside of the traditional financial system.
33. Are these disruptive innovations for inclusive growth? Both these developments are based on leveraging technology in unusual way, so they are innovative; both have the great potential to be disturbing the standard ways in which currency and credit systems are operated, and so are disruptive. Do these developments have potential implications for financial inclusion? Yes, of course; they both can assist financial inclusion and therefore inclusive growth. Crypto currency can support activities which do find difficulties in settling such transactions in the normal ways. The crowdfunding can help some funds needy person or entity, in searching and locating those who have the particular aptitude and willingness to help that person or entity, as only such people / entities respond to the crowdfunding call. This way both can support financial inclusion.
34. Then, why do I say that they may not be desirable? Why do I say that they may be questionable? For one thing, they both hope to operate in a regulator free environment. In matters financial, it is a quintessential received wisdom of several centuries that unregulated financial system has immense scope for depriving ordinary public of their hard earned money and therefore highly risky to be permitted to grow. It doesn’t stop there; there will be no enforcer as well. This is extremely risky, especially when such a system operates internationally. It is true that in crowdfunding there will be a platform which does have the role of an enforcer. However, its effectiveness is questionable and mostly one-sided. Secondly, both have the potential to support criminal, anti-social activities like money laundering, terrorist funding and tax evasion. While we do not have any reported instances of crowdfunding in this respect, crypto currencies have been widely suspected to finance criminal activities. We have to be carefully and critically watching these developments. That is why I said these innovative developments which have the potential to be disruptive, may not be of so desirable, or may be of questionable, relevance and merit.
Conclusion
35. To conclude, we find that several disruptive innovations in the financial sector have immense demonstrated potential to further inclusive growth through financial inclusion. Country is getting fruits of such labour. Financial regulations also are supportive of disruptive innovation and they also employ the same. However, we need to be cautious about certain other disruptive innovations which have potential to be highly risky and can be destabilising.
36. Thank you all for patient listening!
