make it money, it has to be stamped and issued by a sovereign to make it money. 14. if cryptocurrencies are neither a currency in the usual sense of the term, nor a financial asset nor a physical asset what are they? the proponents have improvised to call them as digital assets. even that is doubtful as cryptocurrencies do not have any underlying use, like for instance car hiring softwares or a core banking systems, or, for that matter, smartphones. that basically leads to the conclusion that it is an electronic code ( with no practical use ) which has created enough hype such that people are willing to pay money to buy ownership rights to that electronic code, seemingly on the hope that someone else would buy it at a higher price in future. what started off as a medium of exchange has appeal similar to that of a speculative asset. 15. as a store of value, cryptocurrencies like bitcoin have given impressive returns so far, but so did tulips in 17th century netherlands. cryptocurrencies are very much like a speculative or gambling contract working like a ponzi scheme. in fact, it has been argued that the original scheme devised by charles ponzi in 1920 is better than cryptocurrencies from a social perspective 5. even ponzi schemes invest in income earning assets. a bitcoin is akin to a zero - coupon perpetual ; it ’ s like you paid money to buy a bond which pays no interest and which will never pay back the principal. a bond with similar cash flows would be valued at zero, which, in fact, can be argued as the fundamental value of a cryptocurrency. if everything eventually returns to its https : / / www. ft. com / content / 83a14261 - 598d - 4601 - 87fc - 5dde528b33d0 equilibrium value, then the prognosis for investors in cryptocurrencies is not a happy one. ( ii ) what useful social or economic role does a cryptocurrency play? 16. if cryptocurrencies are actually intended to revolutionize finance, we need to understand what precise role they play in finance. an equity share enables a business to mobilize risk capital, a bond enables a company / government to borrow money, a mutual fund enables retail investors to diversify their portfolio, derivatives enable users to manage

regulatory, supervisory, and technological framework on par with international best practices enables strengthening of the domestic banking system, which would help in fortifying it against the risks that might arise out of globalisation. in india, we had strengthened the banking sector to face the pressures that may arise out of globalisation by adopting the banking sector reforms in a calibrated manner, which followed the twin governing principles of non - disruptive progress and consultative process. global challenges in banking 4. recently i was afforded an opportunity to speak on the challenges faced by the indian banking industry. to recapitulate, i had identified a few broad challenges faced by the indian banks in the following areas, viz., enhancement of customer service ; application of technology ; implementation of basel ii ; improvement of risk management systems ; implementation of new accounting standards ; enhancement of transparency & disclosures ; and compliance with kyc aspects. if we were to identify a few global challenges which banks face today, i am sure we would cover some common ground. an overview of the global challenges would include the following : basel ii implementation ; enhancing dr. y. v. reddy on banking sector reforms in india an overview at the institute of bankers of pakistan, karachi, pakistan, may 18, 2005. corporate governance ; alignment of regulatory and accounting requirements ; outsourcing risks ; and application of advanced technology. i propose to cover these aspects now. basel ii implementation 5. basel ii implementation is widely acknowledged as a significant challenge faced by both banks and the regulators internationally. it is true that basel ii implementation may be seen as a compliance challenge. while it may be so for some banks, i would venture to mention that basel ii implementation has another dimension which offers considerable opportunities to banks. i would like to highlight two opportunities that are offered to banks, viz., refinement of risk management systems ; and improvement in capital efficiency. 6. comprehensive risk management : under basel i banks were focused on credit and market risks. basel ii has brought into focus a larger number of risks requiring banks to focus on a larger canvas. besides the increase in the number of risks, banks are now beginning to focus on their inter - linkages with a view to achieve a more comprehensive risk management framework. basel ii implementation, therefore, is being increasingly seen as a medium through which banks constantly endeavour to upgrade the risk management systems to address the changing environment. further, in the initial stages, banks were managing each risk in isolation. it is no longer adequate to manage each