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Top Indian Banker Says US Dollar Has ‘Disproportionate Power’ as Reserve Currency; Retracts ‘Biggest Financial Terrorist’ Remark
Uday Kotak, the CEO of Kotak Mahindra Bank, a financial institution based in India, recently expressed his view on the dominance of the U.S. dollar in global financial markets. Kotak stated that the U.S. dollar has “disproportionate power” as a reserve currency, retracting his previous statement in which he referred to the currency as the “biggest financial terrorist in the world.” Kotak explained that several countries were exploring alternative reserve currencies to reduce their dependence on the U.S. dollar.
Top Indian Banker Refers to the Dollar as ‘Biggest Financial Terrorist’ in the World
Uday Kotak, CEO of Kotak Mahindra Bank, an institution that registered more than .5 billion in revenue in 2023, referred to the subordination that world markets have to the U.S. dollar hegemony. In a panel at the ET Corporate Excellence Awards, an event of the Indian news conglomerate Times network, Kotak stated that the American currency was “the biggest financial terrorist in the world,” criticizing the power it had as a reserve currency.
Explaining his stance, Kotak declared:
All our money is in nostro accounts and somebody in the U.S. can say- you cannot withdraw it from tomorrow morning- and you are stuck. That is the power of the reserve currency.
This dependence is what is driving several nations of the world to seek an alternative reserve currency, Kotak remarked, stating this was a “crucial time in world history.”
However, Kotak later corrected these statements on social media, explaining he wanted to make reference to the ‘disproportionate power’ the currency had in world markets. He explained:
In a recent discussion on US dollar I inadvertently used words “financial terrorist” which I would like to correct. What I meant was that a reserve currency has disproportionate power, whether it is nostro account, 500 bps rate increase, or emerging countries holding dollars for liquidity.
The Run to Have the Next Reserve Currency
Global geopolitics and the rise of sanctions against Russia have changed the landscape of how payments are being settled and which currencies are being used. China has recently made advancements in profiling the Chinese yuan as a friendly token for international markets, with Russia also promoting it.
On the different countries that might become holders of the next reserve currency, Kotak stated:
“I don’t think Europe can, because it is the disunited states of Europe. I don’t think UK or Japan have the heft to be taking that position, though both the British pound and the yen are free currencies. China, I think, has a major issue of trust with many many countries around the world.
However, Kotal believes that India can have a shot at making the Indian rupee the next U.S. currency, but it will take ten years, during which the country will have to build strong institutions and a framework behind it.
India has already opened its doors to other countries to settle cross borders payments with the Indian rupee, as part of its most recent foreign trade policy guidance, with the objective of allowing countries facing a dollar crunch to keep trading goods.
What do you think about Uday Kotak’s opinion on the current role of the U.S. dollar as a reserve currency? Tell us in the comments section below.
Report: Banks Are More Vulnerable to Terrorist Financing Than Crypto
A risk assessment report released by the Financial Information Unit (FIU) found banks more vulnerable to money laundering and terrorist financing risks than cryptocurrencies, Business Korea reported.
The division of South Korea’s Financial Services Commission researched its domestic financial sector, which includes banks, securities companies, insurers, mutual financing companies, credit card services, and even crypto exchanges. After a thorough assessment, it found that while banks had better systems to repel money laundering and terrorist financing activities, they were yet more exposed to them than any other financial business.
“The banks have better systems against money laundering and terrorist financing than other financial companies,” the study revealed. “Yet the former’s vulnerability is higher due to the larger size of the banking sector and the innate characteristics of their products and services like trade financing, cash management service, and forex trading.”
At the same time, the FIU study noted that transactions involving cash and cryptocurrencies are also vulnerable to the same criminal activities, but cryptos mainly are less likely to be used for terrorist financing.
“The anonymity of cryptocurrency trading hinders tracking, and criminals can take advantage of it,” FIU found. “The same applies to cash dealing as large-denomination bills rarely return.”
Related Reading: Bitcoin is Criminal Money Says the Media While Deutsche Bank Gets Raided for Laundering
Bitcoin Not Popular Among Terrorists
The report of the South Korean financial regulator finds similarities in what Europol said in its Intenet Organized Threat Assessment 2018 report. The 72-page long study also revealed that terrorists were not using cryptocurrencies like Bitcoin. Instead, they were using conventional banking methods to fund their operations across Europe.
“Despite the clear potential, none of the attacks carried out on European soil appear to have been funded via cryptocurrencies,” Europol had found. “The use of cryptocurrencies by terrorist groups has only involved low-level transactions – their central funding still stems from conventional banking and money remittance services.”
A month later, Yaya Fanusie, who serves as the director of analysis for the Foundation For Defense of Democracies Center on Sanctions and Illicit Finance, told the U.S. Congress the very same thing: that terrorists have attempted to raise money via cryptocurrencies, but to no avail.
South Korea Drafts Crypto Bill
The FIU report has indicated the need for a crypto law in South Korea, fearing a surge in money laundering crimes involving cryptocurrencies. Around the same time, a lawmaker has reportedly introduced a bill, called the Digital Asset Trading Promotion Act, to promote the development of crypto exchanges and trading as the whole.
Seoul Finance, a South Korean daily, confirmed that Kim Sun-dong, a member of the National Assembly’s Political Committee, has introduced a comprehensive plan to regulate crypto exchanges without hampering their innovative prospects. Excerpts from the drafted bill were quoted by the publication as follows:
“Those who want to operate a digital asset trading business should have more than 3 billion won [~.66 million] in [the] capital, enough manpower, computerized systems, and physical equipment to be approved by the Financial Services Commission.”
South Korea is scheduled to undergo a financial audit by the Financial Action Task Force (FATF) starting January 2019 until February 2020. The government is likely to impose capital restrictions should the outcome of the audit become negative.
Featured image from Shutterstock.
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