MAS Says Crypto Unsuitable as Money, Lays Groundwork for Digital Singapore Dollar

MAS Says Crypto Unsuitable as Money, Lays Groundwork for Digital Singapore Dollar

by November 9, 2021

Cryptocurrencies have performed poorly as a medium of exchange, a store of value, or a unit of account said Ravi Menon, the Managing Director of the Monetary Authority of Singapore (MAS) during a speech at the Singapore Fintech Festival today.

Ravi firmly believed that cryptocurrencies are not comparable to money and instead preferred to call them by their more accurate technical name; crypto tokens.

Ravi Menon

Ravi Menon

“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,”

he added.

The regulator seems to have taken a harsh stance on the use of tokens as an investment asset for retail investors given their volatile nature.

He explained that the prices of crypto tokens are not anchored on any economic fundamentals and are subject to sharp speculative swings, putting investors at a great risk of suffering significant losses.

Ravi, however, did concede that on the flip side MAS is of the view that blockchains and crypto tokens can bring many potential benefits.

He went on to add that while the blockchain technology is promotes the transparency of transfers of value, there is still a lack of trusted central party and reliance on a central party is too costly.

But crypto tokens does have a potentially strong use case to facilitate cheaper and faster cross-border payments and trade finance.

However, in order to be regarded as money, crypto tokens need to be more stable in value and have credible backing which is where stablecoins make an appearance.

As stablecoins seek to combine the credibility of fiat currencies with the advantages of the blockchain, they are beginning to find acceptance outside of the crypto ecosystem.

Again, MAS is cautiously threading the waters even as it recently licensed several digital payment token services providers including QR code payment solution provider FOMO Pay, DBS’ brokerage arm DBS Vickers, and Australian cryptocurrency exchange Independent Reserve.

Ravi did take a brighter view on the future of Central Bank Digital Currencies (CBDCs) mainly as the liabilities falls on regulators.

While MAS says that it sees much promise in wholesale CBDCs, the jury is still out on retail CBDCs.

The regulator has been studying the use cases of retail CBDCs as weighed the benefits of issuing a digital Singapore dollar.

Ravi concluded that while Retails CBDCs had its upside, “the case for a retail CBDC in Singapore is not urgent”.

Nevertheless, MAS announced that it will be embarking on Project Orchid to lay the groundwork to issue a digital Singapore dollar should the nation island decide to do so in future.


Featured image: Bloomberg