During a speech at the Singapore FinTech Festival on Tuesday, November 9, 2021, Ravi Menon, the Managing Director of the Monetary Authority of Singapore (MAS), shared his thoughts on the future of money, finance, and the internet.
Discussing cryptocurrencies, the Managing Director stated:
“Are cryptocurrencies money? So far, the answer must be no cryptocurrencies have performed poorly as a medium of exchange, a store of value, or a unit of account.”
Indeed, Ravi considers that cryptocurrencies were not analogous to money and states MAS to refer to them by their more appropriate technical term, crypto tokens, rather than by their financial equivalent.
“We define tokens that are used for payments purposes as digital payment tokens, and entities which provide services related to such tokens in Singapore are subject to licensing and supervision by MAS, primarily for money laundering and terrorism financing risks.”
Crypto is unpredictable
Given the unpredictable nature of tokens as an investment asset for individual investors, the regulator seems to have taken a tough position against their usage. As a result, he continued, that the price of cryptocurrency tokens is not based on any economic fundamentals and is vulnerable to strong speculative fluctuations, placing investors at a high risk of incurring big losses.
On the other hand, Ravi acknowledged that MAS believes blockchains and cryptocurrency tokens can bring about a slew of positive outcomes.
According to him, although blockchain technology enhances transparency in asset transfers, there is still an absence of a trusted central party, and relying on a central party is prohibitively expensive in the long run.
However, there is a significant potential use case for cryptocurrency tokens to facilitate cheaper and quicker cross-border payments and trade financing. Nonetheless, to be considered money, crypto tokens must have a more steady market price and solid support, which is where stablecoins come into play.
Ravi is optimistic about CBDCs
Regarding Stablecoins, which seek to combine the credibility of fiat currencies with the advantages of blockchain technology, they are beginning to gain acceptance outside of the crypto world as a result of their efforts to combine the credibility of fiat currencies with the advantages of blockchain technology.
Ravi was more optimistic about the future of Central Bank Digital Currencies (CBDCs), primarily because the liabilities lie on the shoulders of regulators. For now, the MAS thinks that wholesale CBDCs show great potential, but it is still too early to tell whether or not retail CBDCs will follow suit. When considering the pros and cons of creating a digital Singapore dollar, regulators have been analyzing retail CBDC use cases.
Although retail CBDCs have certain advantages, Ravi believes that the need for a retail CBDC in Singapore is not urgent. Nonetheless, MAS indicated that it would begin Project Orchid to provide the basis for the nation island to issue a digital Singapore dollar in the future, should it choose to do so.