Cash is
the most predominant used payment instrument across the globe. Consumers choose to use cash
more frequently than any other payment instrument, including debit or credit cards.
In particular, cash plays a dominant role for small-value transactions, is the
leading payment instrument for many types of purchases, and stands as the key
alternative when other options are not available. Counterfeiting poses
increasing challenges to currencies across the global. With advancement of
printing technology counterfeiting has become very easy and cheap. To add to
this with the help of state actors in supporting terrorism is also helping
counterfeiting currencies.
Counterfeiting is a major economic problem, called “the
world’s fastest growing crime wave” ……………………………………………….(Phillips, 2005).
Source RBI Report
Countries like
India estimating the loss due to currency counterfeiting is still a big
challenge. Some of the available statistics available in the public domain suggest India seems to be
low compare to Canada, UK, Mexico and the Euro Area which is about 40 billion pieces
of notes as against 1.7 billion pieces of note in circulation in Canada.
The counterfeiting of higher denomination is an
emerging trend in the share of currency counterfeiting (Rs 500 and Rs1000). It
has an effect on the Indian economy also.
In this
paper I would like to discuss ways how we can prevent currency counterfeiting
using different methods
Every
Currency note need to have a separate DNA / identification. Normally the serial
number identification water marks etc.
But are these really very effective. Bank notes are made of heavy paper, almost
always from cotton fiber for strength and durability. Some countries including
Nigeria, Romania, Mexico, New Zealand, Australia and Singapore use polymers(Plastic)
to improve to improve longevity and allow the inclusion of
a small transparent window (a few millimeters in size) as a security feature
that is difficult to reproduce using common counterfeiting techniques. Watermarks
can also be made on polymer currency, for example, Australia has its coat of
arms watermarked on all its plastic bills. Printed with white ink, simulated watermarks have a different
reflectance than the base paper and can be seen at an angle. Because the ink is
white, it cannot be photocopied or scanned. We need to evolve new ways to help currencies identify using
electronic or digitize ways.
Source : Wikipedia
1. Use of Embedded
RFID Tags : RFID tags can be embedded in the currency and
have security tokens which can be authenticated by a central government system.
Banks and Currency Exchangers can be provided with validation devices which can
be connected with the central system to validate. Since each currency has its
own DNA it would be difficult for counterfeiting. The token number can be a
combination of serialnumber + date of printing (which can be only known to the
central system) + denomination + some secret token. This can be done for high denomination
currencies like 500 and 1000.
Sample Implementation
The QR code can be a combination of same logic and can be verified
using secured readers provided by government agencies / private agencies and certificated
provided by the central government of RBI
It can also be a combination of both. With identification being a key
for the currency it will also help the government to track the currency flow
and also help in reducing black money. QR Scanner can be implemented in Mobile
POS and Smart Phones to help citizen validate the currency themselves with simple
mobile apps provided by RBI to validate the currency.
. Using Digital E-Currency : Using digital currency like Bitcoin. Rupee
should also have a digitize version issued by the RBI. This will save the
country from printing the currency . Provide smartcard based aadhar cards which
will hold the currency like rupee wallet. Making the wallet acceptable at most
of the retail reduce the use of cash will also help in reducing counterfeiting.
It will also help preventing fraud and misuse of Government Scheme money since
the aadhar will be connected to the bank a/c. Also wallet can be implemented in
the mobile in place of the aadhar card since mobile penetration is very high in
the country. With Modi’s plan of Financial Inclusion Bank A/c for every citizen
will help in implementing the digitization more effectively. Digital India will also be a key driver to
bring in digitization of the Indian Rupee. Using signature to transfer fund between
wallet for B2C and C2C transfer will help in secured and validated transaction
management. This will also help in reducing black money in the market and help
us build a robust and digitized economy
Implementing Digitization
The Central Hub will help in Validating the Currency Token. Merchants ,
Banks and Citizen will use the services of the regional verification Agency to
help verify the currency. The verification needs to be realtime system hence
should provide only read only access. The e-currency can be implemented using
the same platform for validation. Government can implement verification
services using private and public partnership. The same can be used for Address
and KYC verification similarly it can be also implemented on the Aadhar
Verification Services. The same infrastructure can be used for Currency Token
Generation using Hardware Security Devices
Some of major challenges to implement digitization of currency is the
1. Scale of economy of the currency in India
2. The acceptance of the citizen of India for usage of currency
