RBI deputy governor fears digital money could fund illegal, terrorist activities

By Pratik Bhakta & Sangita Mehta

MUMBAI: The Reserve Band of India (RBI) has once again warned about the risk associated with alternate funding such as crowd funding and crypto currency like Bitcoin even as both can assist financial inclusion. Deputy governor of the RBI, RR Gandhi pointed out that the biggest risk associated with them is that both operated in an unregulated environment and could go towards funding illegal activities.

Gandhi raised serious concern on digital money while stating, "these can be involved in money laundering, tax evasion and terrorist funding. Crypto currency has been found to be involved in terrorist funding."

Earlier in the day, S S Mundra, another deputy governor of the RBI has called for a need to have a legal framework to regulate those raisng money through crowd funding in order to protect investors. Last week, RBI governor, Raghuram Rajan had also raising a red flag about crowdsourcing and crypto currency.

Speaking at FIBAC, Gandhi said that both (crowd funding and crypto currency) hope to operate in a regulator free environment. "But unregulated financial transactions always run the risk of depriving people of their hard earned money and therefore (it is) highly risky to be permitted to grow, especially when such a system operates internationally."

Crowdfunding is defined by capital markets regulator Sebi as the gathering of funds from multiple investors through a web-based platform for a specific creative project or business venture or for some social cause.