Virtual Currencies Like Bitcoin Come Under RBI Scrutiny
India’s central bank has a problem with virtual currencies, the likes of Bitcoin, because it fears that its being used for money laundering.
According to a new report, the Reserve Bank of India has expressed concern over the rise of virtual currencies. The report cites D Sivanandhan, former Director General of Police & the security adviser to the Reserve Bank of India as saying that “crypto currencies are becoming a major avenue for money laundering.”
Regulators across the world are coming to terms with the use of virtual currencies. In the United States recently, virtual currencies have been warned by state regulators that they will be shut down if they do not stick to money transmission laws.
The RBI said in its June 2013 financial stability report:
Globally, the use of online and mobile technologies is driving the proliferation of virtual banks, virtual currencies (Box 3.4) and provision of banking and payment services by unlicensed entities. While leveraging on technology has resulted in many benefits, especially, in extending the reach of the financial services, these developments pose challenges in the form of regulatory, legal and operational risks.
The report also delves into the definition of virtual currency and that regulators are studying the impact of online payment options and virtual currencies to determine potential risks associated with them. Virtual currencies are still in very early stages in the country.
RBI & Electronic Payments in India
Last year, the reserve bank ruled out the possibility of telecom companies launching mobile wallets on their own. However, it allowed telcos to partner with banks to provide mobile wallet services. This was a move to keep the regulatory environment under control.
Vodafone offers M-Pesa in India and Airtel has Airtel Money in India. Worldwide mobile payment transactions are expected to reach $235.4 billion in 2013, up 44% from 2012, according to a report.