I've never heard of doing this, but I would think it would cause you more problems than using potato or carrot. It just seems like a paper towel would encourage mold growth faster than a piece of vegetable.
If you wring the towels out as much as you can so you no longer get any water dripping then you shouldn't have any problems with mold because they'll dry out too quickly for that. I've done this before and it works fine, but I also prefer fruits and veggies for moisture. Small thin apple slices and celery sticks split down the middle are my favorites.