. the blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value. blockchains are an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. using this technology, certain innovative products which have come on the scene have excited a large section of people around the world. i am referring to the bitcoins phenomenon. the way the bitcoins have caught the imagination, generated interest, and gained value has led to some quarters predicting end of the currency system. i suppose these predictions about of death of banks and financial institutions, and also the currency have naturally aroused the curiosity at minimum and concerns among the regulators and central bankers around the world. innovations, admittedly, bring in positive changes in efficiency, productivity, quality, competitiveness, and market share, among other factors. however, as innovations usually result in paradigm shifts, they are typically disruptive. it takes effort and time to understand them. the associated dangers include untested effects, lack of clarity on long term effects, and can lead to misunderstanding and misusing the innovation. innovations can sometimes be bad per se ; sometimes even good innovations can be misused. innovations, which are by definition leveraging technology in unusual way, have the great potential to be disturbing the standard ways in which systems are operated. however, in that process while we do gain, it is not uncommon that these innovations do inflict pain on the society. therefore, a careful analysis of the pros and cons, a thoughtful ring - fencing of risks, closer study on pilot basis before scaling up, fine - tuning based on feedback, etc are required before we adopt such innovations. what are the downside risks of market place financing and blockchain technologies? market place financing links the fund raiser / s and fund provider / s. fine. that eliminates the need for a financial intermediary and therefore all the costs associated with that. however, who guarantees the good performance of the fund raiser / s and fund provider / s? who will enforce the contractual obligations? when each of them is faceless to one another, and is at great distance, even beyond borders, the issue gets complicated. therefore, market place financing may not be suitable for large amounts. it is a received wisdom in finance that after the initial rounds of acceptances and successes, the moment the rounds increase

r gandhi : fintechs and virtual currency inaugural speech by mr r gandhi, deputy governor of the reserve bank of india, at the “ fintech conference 2017 ”, organized by ficci, iba and nasscom, mumbai, 1 march 2017. * * * i am very glad that iba, ficci and nasscom are organizing this conference as a platform for innovation and collaboration with upcoming and promising ( picup ) fintech. technology and banking have a long close association. both have been benefitted immensely by this association. technological developments have been changing the way the banks and financial institutions and their customers interact. these developments have created opportunities for new entrants, not necessarily new bankers, to disrupt traditional business models and penetrate new markets. the plethora of technological products and services have helped emergence of fintech companies who offer different ways of doing traditional services, that too in more efficient ways. from the time the concept of money was understood, the concepts of lending and borrowing came into existence. however, the organised way of lending and borrowing happened when the prototypes of modern banks were established some 700 years ago. banks undertook another service i. e., the remittance service. the mega trends in the fields of information and communication technology have redefined banking and banks. actually it is not redefinition, but de - definition. banking is no longer what a bank does ; it is also what a non - bank does. banks are no longer those entities who do banking exclusively ; now others, the non - banks also do banking. chunking of banking is the norm ; and for undertaking each of these chunks, there are some specialist entities who perform only those chunks. payment service providers, p2p services, p2b services, sme financing, consumer retail financing, disintermediation, crowd funding, open ended mutual funds, money market mutual funds, deposit alternatives, trade financing, invoice financing, bill discounters, bill collectors, credit referrals, account aggregators, interest free products, syndicators, investment bankers, mfis, co - ops, hfcs and credit rating agencies are some of the entities who chipped away chunk after chunk of banking. is there an element of banking that remains the exclusive privilege of banks? the chunking away of banking from the banks has given enormous business and growth for these non - banks. with their specialisation and focussed service rendering, they are able