The Reserve Bank of India has admitted that the technology behind bitcoin can help to fight money counterfeiting.

Two years ago the RBI warned Indian citizens against the use of digital currencies. In December 2013 it issued a note of caution that focused on potential dangers concerning financial, operational, legal, customer protection as well as security-related risks entailed by the use bitcoin.

However, this week the RBI published a report on financial stability reevaluating the key technical concept of distributed ledger lying behind bitcoin.

In its report the RBI recognises that “with its potential to fight counterfeiting, the 'blockchain' is likely to bring about a major transformation in the functioning of financial markets, collateral identification (land records for instance) and payments system.” The report underlines the revolutionary potential of blockchain, which has not yet been fully understood.

“Regulators and authorities need to keep pace with developments as many of the world's largest banks are said to be supporting a joint effort for setting up of 'private blockchain' and building an industry-wide platform for standardizing the use of the technology, which has the potential to transform the functioning of the back offices of banks, increase the speed and cost efficiency in payment systems and trade finance," the RBI said.

India, with its high IT-potential, is considered to have a very thriving and promising ecosystem for financial technologies development. Curiously enough, the attention of regulators, financial institutions and developers is currently shifting from virtual currencies to their technological basis. Yet in August 2015 Coinfox covered the FIBAC banking conference in Mumbai devoted to the discussion of the pros and cons of digital currency.

Anna Lavinskaya