Making a case for regulation of new financial products, RBI deputy governor SS Mundra said that innovations such as crowd-funding and crypto-currencies should be monitored to avoid negative fallout.
“It is near impossible to regulate the behaviour and choices of individuals… hence, it will be more practical for the regulatory authorities to push for bringing in appropriate regulatory changes in their jurisdiction which would enable regulation of the aggregators’ electronic dealing platform,” Mundra said at a banking event hosted by Ficci and IBA.
RBI is also watching the space of bitcoins or virtual currency, Mundra said. The RBI had first flagged concern against virtual currency or bitcoins in December 2013. These are virtual currencies that are used for online transactions alone. Though it is not backed by any central bank in the world, these currencies are traded on a number of exchanges, or are swapped privately.
Mundra added as electronic currencies grow, they have an enormous impact on the central banks’ money supply estimates and, thus, on monetary policy as well. Key concerns that regulators have on such currencies is the potential money laundering activities, volatility in exchange rate to legal currency and policy implications. Mundra noted that virtual currency or bitcoins give the benefit of anonymous usage and convenience.
Other areas such as peer to peer lending, crowd sourcing and internet-only banks also need to be carefully regulated, Mundra said.