 "Illustration: Ajay Mohanty")
Ratings agency Moody's Investors Service on Wednesday said it sees cryptocurrencies like bitcoins to continue facing regulatory hurdles in the near term.
In a report on fintech and banks of the future, it said cryptocurrencies threaten payments providers who charge a commission of up to 7.2 per cent but the price volatilities and regulatory clampdown is an impediment.
"We do not expect a near-term reversal of this trend (of regulatory clampdowns on cryptocurrencies)," the report said.
Stating that cryptocurrency technologies offer sizeable savings through peer-to-peer alternatives, it said if a start-up can offer a product that charges a fee of two per cent on remittances, it can lead to a $15-billion saving annually.
It noted retailing giant Walmart and Moneygram have tied-up to offer remittances and also the tie-up between a global consortium of banks and Ripple, a blockchain start-up, which has introduced its own cryptocurrency.
The report comes amid a tightening of norms surrounding the cryptocurrencies in India. The Reserve Bank of India (RBI) has virtually insulated the financial system from touching any cryptocurrency-related transaction, but affirmed its commitment to the blockchain technology and also sounded open to the possibility of launching a fiat cryptocurrency.
The agency explained that cryptocurrencies provide an alternative payment system that eliminates the need for centralised institutions to approve transactions but their use has been limited due to regulatory actions and price volatilities.
In the report, the agency said innovative banks will thrive while laggards will get disrupted.
"Incumbent banks that aggressively pursue agile digital strategies will defend their core franchises, broaden their customer bases and improve efficiency, supporting their creditworthiness. Laggards will face increased customer attrition, reduced pricing power and uncompetitive cost structures," it added.
