Cryptocurrencies are a threat to payments providers who charge a commission of up to 7.2 per cent.
Cryptocurrencies like bitcoins are most likely to continue facing regulatory obstacles in the near term, according to ratings agency Moody's Investors Service.
In its report on fintech and banks of the future, the ratings agency said that cryptocurrencies are a threat to payments providers who charge a commission of up to 7.2 per cent. However, it names price volatilities and regulatory clampdown as impediment.
Cryptocurrencies open up an alternative payment system that eliminates the need for centralised institutions to approve transactions, says the agency report, and adds that regulations and price volatilities have been an impediment in it taking off.
The agency also does not anticipate any near-term reversal in the trend of regulatory clampdowns on cryptocurrencies, the report said.
The report states that cryptocurrency technologies offer considerable savings through peer-to-peer alternatives. Giving an example it noted that if a startup can offer a product that charges a fee of two per cent on remittances, it can lead to a $15-billion saving annually.
The report highlights how Walmart and Moneygram have tied-up to offer remittances and also the collaboration between a global consortium of banks and Ripple, a blockchain startup, which has introduced its own cryptocurrency.
With global tightening of norms around cryptocurrencies, as well as in India, the report offers a refreshing insight.
Innovative banks will thrive while laggards will get disrupted, says the reports adding, "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.”
Notably, the Reserve Bank of India (RBI) has strengthened the regulations so much so that the India financial system remains effectively insulated from touching any cryptocurrency-related transaction. RBI has however affirmed its commitment to the blockchain technology. Further, according to media reports, it is also open to the launching a fiat cryptocurrency.