Online payments systems such as Bitcoin and PayPal are being studied the United States Federal Reserve after concerns were raised they could have a negative impact on the financial system.
Janet Yellen, vice chair of the Federal Reserve, was speaking at the annual Monetary Conference, in Shanghai, China, today where she said the concerns had come from bankers.
HumanIPO reported in April how South Africa’s Standard Bank was already deep into developing its own cloud banking system. With their technology, chief Ngoni Simelane said, there would be no need for players such as Visa and Mastercard in the future because of the rise of digital money.
The AFP reported Yellen as saying: “We have been talking… with banking organisations over the last year or two, trying more carefully to understand what the concerns are with these new payment mechanisms.”
The main concern for the officials at the conference was that the virtual currency can be used by criminals or terrorists or be vulnerable to hackers.
However she was quick to deny the view that online payment mechanisms have been operating unregulated, emphasising that the US has a stronger regulatory environment than many are aware of, especially in the area of consumer protection.
“In point of fact, at least in the United States, there are regulations that apply to PayPal and other payment providers,” she said.
PayPal is the online payments arm of US internet retail giant eBay, while Bitcoin is a digital currency launched in 2009 that is not regulated or supported by any government.
“But that said, this is very much on our radar screen and we are carefully trying to identify where the risks are,” Yellen added.
HumanIPO reported last month the US authorities had closed down digital currency site Liberty Reserve, based in Costa Rica, which allegedly handled huge amounts of money outside the control of national governments.
