As Bitcoins and other virtual currencies become more popular, prominent banker Uday Kotak says central banks, including India's RBI, would have to take a hard look at this phenomenon and take a decision on the future of such currencies.
Davos: As Bitcoins and other virtual currencies become more popular, prominent banker Uday Kotak says central banks, including India's RBI, would have to take a hard look at this phenomenon and take a decision on the future of such currencies.
"My view is that Bitcoin is in very early days and it is an artificial currency. But whether it is creating new money, whether it is sustainable, whether it would survive, I have many questions about it.
"People do not understand it well enough and I believe that for it to be a really widely used currency, it has to be simple," Kotak told said in an interview.
Kotak, who was here for the World Economic Forum Annual Meeting, is Vice Chairman and Managing Director of Kotak Mahindra Bank.
His group is one of the leading financial services player in India with a net worth of over USD 2.6 billion and it is present in a number of other countries as well including in the US, UK, UAE and Singapore.
Asked whether it was time for central banks across the world to come out with strong regulations on virtual currencies, he replied in the affirmative and said certainly there have to be guidelines, although the RBI has already come out with a warning.
"I think each central bank will have to take a very hard look at it and then take a decision. Then, there has to be a decision by global banking authorities on the future of this newly created currency," he said.
On talks about the need for a global financial regulator, Kotak said it would be very difficult to have a one-size-fits-all system. "Let's be very clear that regulations of each country are also determined by the politics of that particular country."
"So, I will be very surprised if something like a single global regulator is made. There may be some standard rules for all countries, but (having) a single regulator will be very challenging," he said.
Asked whether the grant of new banking licences by the RBI would shake-up the system, he said this was unlikely to be the case.
"Because if you look at the structure of our banking sector, 75 percent is owned by the public sector. So, it is unlikely that new licences would shake up the system.
"What I feel is that new banking licences will not shake up the system, but it will put some pressure on the people, but in terms of core business I am not worried," he added.
Asked about the target levels for the stock market this year, Kotak said: "There are some major political events lined up in India and therefore it is dangerous to predict levels, but I am feeling more optimistic about Indian equities than I have done in the last three years.