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What are crypto-currencies and bitcoins?

The Reserve Bank of India (RBI) has mostly been silent on the regulations related
to crypto-currencies such as bitcoins, other than sending out a cautionary message
in 2013. But that has not restricted the use of crypto-currencies in India.This is
evident from the number of companies that have been launched in the last 3 years,
allowing individuals to buy and sell crypto currencies. According to Tracxn, which
provides financial information on start-ups: from four such companies in 2013,
there are almost 20 in India now.
A crypto-currency is a digital currency created through encryption techniques.
Bitcoin is the most famous. Some others are: litecoin, peercoin, namecoin, ether
and primecoin. In India, most companies are associated with bitcoins.
Different kinds of businesses have also sprung up around bitcoins, including:
exchanges, portfolio management, technology solutions, trading platforms and
bitcoin mining. Indians are using bitcoins to trade, make payments for overseas
transactions and to convert into Indian currency.
Currently, there are four bitcoin exchanges in India: Coinsecure, Zebpay, Unocoin
and BTCX India. Like any other currency exchange, the value of the crypto-currency
is affected by factors such as news or policy changes. Each exchange disclosed the
market price on its website. To buy or sell a bitcoin from a website, you need to
sign up with one of the companies. You also need to have a bitcoin wallet.
Companies may ask you to go through a know-your-customer (KYC) process, where you
need to provide PAN, mobile number and account details. You may not be able to
transact using a third-party bank account.

Crypto-currencies: are they safe to use?

On 19 September, a U.S. federal judge ruled that bitcoins qualify as money. This
decision was linked to a criminal case where the accused hacked into the systems of
Jpmorgan Chase & Co and some other organisations, Reuters reported. So, if you
possess some bitcoins or are planning to venture into this space merely out of
curiosity, you need to remember that as of now, crypto-currencies like bitcoins are
not regulated in India.
In 2013, the Reserve Bank of India (RBI) had cautioned the users, holders and
traders of virtual currencies, including bitcoins, about the potential financial,
operational, legal, customer protection and security-related risks that they could
expose themselves to
Two years after the 2013 cautionary note, in December 2015, the RBI spoke about
looking into blockchain�the underlying technology of bitcoin. And in June this
year, it spoke about setting up a committee to study the benefits of blockchain
technology for banks. It�s not easy to regulate a technology that is as disruptive
as bitcoin.
Besides regulatory concerns, bitcoins have been vulnerable to cyber frauds
Bitcoins in India are mostly used to trade, to make payments for overseas
transactions and to convert into Indian currency.
If you profit from trading in bitcoins, how will you be taxed? The crypto-currency
industry lacks consensus on this issue also.It is better to wait for clear
directions from the RBI before buying bitcoins.I would not recommend buying
bitcoins for investment purposes or otherwise. However, if you still want to
venture in this space, tread with caution.

What are the various ways Banks are looking to raise their game using technology?

In July, the Reserve Bank of India (RBI) set up an inter-regulatory working group
to study issues relating to financial technology (fintech) and digital banking in
the country. The aim is to understand major fintech innovations and developments
and how the markets�the financial sector in particular� are adopting new delivery
channels, products and technologies.
The initiative comes in the backdrop of various Indian banks testing out newer
technologies in both the corporate and retail banking space, either independently
or with the help of fintech companies.
Here are five major technologies that banks have either launched, or in various
testing stages, and are likely to disrupt how banking is done:


Blockchain is a digital ledger software code. Essentially, it�s a record keeping

technology, but the difference is that the recording happens on consensus, which is
built into the system itself. Since blockchain is a decentralised ledger, all
system members can access stored information. Though the blockchain technology
emerged from cryptocurrency, Bitcoin, it is not restricted to bitcoins or even to
the financial sector. Consulting firm PWC estimates that around 700 companies are
exploring the use of blockchain, of which 150 are in the fintech space and 25
likely to emerge as leaders.

Globally, banks such as UBS AG, ABN AMRO Bank NV and Deutsche Bank AG are trying to
find ways to use blockchain technology in daily banking. In India, Axis Bank Ltd,
ICICI Bank Ltd and Kotak Mahindra Bank Ltd are also looking at blockchain
technology. Banks see a possibility to use blockchain technology in trade finance
and remittance space.


In the artificial intelligence (AI) space, chatbots seem to have more takers when
it comes to banking. Chatbots are computer programs that can imitate conversation
with people using artificial intelligence. A few examples where artificial
intelligence can be used are for authentication, access, security, interpersonal
recognition, virtual personal teller assistants and smart advisors. For instance,
questions like �How much balance is there in my account?�, �How to load money from
a wallet?� or �How to change my address?� can be answered with the help of a
chatbot. Banks such as HDFC Bank Ltd and Kotak Mahindra Bank are looking to
introduce chatbot-based technology into customer service. In April this year, DBS
Bank Ltd launched a banking app in India with in-built artificial intelligence.
Currently, fintech companies such as niki.ai are also developing Ai-based chatbot
apps and working as an enabler for the banks.


Financial institutions are considered one of the most vulnerable to cyber-attacks,

especially with increasing digitisation. Since securing an account with a powerful
authentication tool is one of the important steps, banks globally are working on
technologies capable of using a customer�s unique characteristics for identity
authentication. Banks and financial institutions across the globe are experimenting
with biometrics for security and authentication purposes. For instance, vein
authentication in Japan and monitoring of heartbeats in Canada has been tested for
identification purposes to allow banking transactions.
Currently, some Indian banks are using fingerprint recognition, voice recognition
and iris recognition for identification purposes. Large commercial banks such as
ICICI Bank, HDFC Bank and Kotak Mahindra Bank are right now in the testing phase.
Smaller banks such as DCB Bank Ltd have already launched fingerprint-based ATM cash
withdrawal using the Aadhaar enabled platform.

Open application programming interfaces (APIS), too, are gaining traction in
banking. Open API basically allows data to be accessible for use to larger
institutions. The government has mandated an open API policy for five programmes:
Aadhaar, E-KYC, e-sign, proposed privacy-protected data sharing and the Unified
Payments Interface (UPI). Many commercial banks are in various stages of using
Aadhaar and E-KYC and offering products linked to it to their customers. For
instance, Aadhaar-enabled biometric authentication is being used to open bank

UPI, the most ambitious project of the National Payments Corp. of India (NPCI), is
now available for transaction. Since the system uses a single identifier, it
eliminates the need to exchange sensitive information such as bank account numbers
during a financial transaction. The objective of a unified system is to offer
architecture and a set of standard APIS to facilitate the next generation online
immediate payments.


In the last couple of years, the payments and transaction space has been changing
with banks and e-wallet companies focusing on newer technologies. Banks are
increasingly adopting technologies that can make transactions easier. Some of the
major payment options that banks are betting on include virtual cards, sound waves,
quick response (QR) codes and near field communication (NFC).

Virtual cards are cards that are saved in your mobile phone�you don�t need to carry
a physical card. Axis Bank is looking to roll out these products soon. Banks are
also testing the technology of using sound waves from the phone. To complete a
transaction, the sound wave generates digital information, which is carried to
another phone. It is similar to sending a picture or video using Bluetooth, except
that you can�t make a monetary transaction. Nfc-enabled cards allow you to transact
without having to insert or swipe a card. You just have to wave your card near the
terminal and the payment is made. Another technology is QR code. It is a machine-
readable code, in a black and white matrix and can be read by a smartphone. Using
this QR code, you can make the payment.

All these technologies are still work in progress for the banking sector. According
to a June Credit Suisse report on Digital banking in India, while India may follow
other developed markets in terms of impact from digital payments, there are many
outcomes which could be unique to India, such as cost of transactions coming down
to zero. The best customer interfaces (read apps) could own the customer.