Ravi Menon, the Managing Director of the Monetary Authority of Singapore (MAS), spoke at the Singapore FinTech Festival on Tuesday, November 9, 2021, about the future of money, finance, and the internet.
In response to a question on cryptocurrency, the Managing Director stated:
“Can you tell me if cryptocurrencies are money? "As a means of commerce, a store of wealth, or a unit of account, cryptocurrencies have fared miserably thus far."
Indeed, Ravi views cryptocurrencies to be unrelated to money, and advises MAS to refer to them by their more technical name, crypto tokens, rather than their financial counterpart.
He continued, "
"We classify digital payment tokens as tokens used for payments, and organizations that provide services linked to such tokens in Singapore are subject to MAS regulation and oversight, particularly for money laundering and terrorism financing threats," says the MAS.
Because of the unpredictability of tokens as an investment instrument for private investors, the regulator appears to be taking a hard line against their use. As a result, he said, the price of cryptocurrency tokens is not based on any economic fundamentals and is subject to large speculative movements, putting investors at risk of significant losses.
Ravi, on the other hand, stated that MAS believes blockchains and cryptocurrency tokens may have a variety of good effects.
Although blockchain technology improves asset transfer transparency, he claims that there is still a need for a trusted central party, and that reliance on a central party is too expensive in the long term.
However, Bitcoin tokens have a substantial potential use case in facilitating cheaper and faster cross-border payments and trade finance. Crypto tokens must, however, have a more stable market price and significant backing to be deemed money, which is where stablecoins come in.
Ravi has high hopes for CBDCs.
As a consequence of their attempts to combine the legitimacy of fiat currencies with the advantages of blockchain technology, Stablecoins are starting to acquire popularity outside of the crypto realm.
Ravi felt more positive about the future of Central Bank Digital Currencies (CBDCs), owing to the fact that regulators bear the risk. For the time being, the MAS believes wholesale CBDCs have a lot of promise, but it's yet too early to say if retail CBDCs will follow suit. Regulators have been examining retail CBDC use cases while weighing the benefits and drawbacks of introducing a digital Singapore dollar.
Despite the benefits of retail CBDCs, Ravi does not feel that a retail CBDC is necessary in Singapore. Nonetheless, MAS said it will start Project Orchid to lay the groundwork for the nation island to issue a digital Singapore dollar in the future, if it so chooses.
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