Singapore central bank MAS calls out crypto risks, speculative swings
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Outside the Singapore central bank headquarters, you will see a sign for the Monetary Authority of Singapore.
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SINGAPORE — Singapore’s central bank and financial regulator warned Tuesday of “sharp speculative swings” and potential risks for retail investors who put their money in cryptocurrencies.
Ravi Menon (the Monetary Authority of Singapore’s managing director), said that cryptocurrencies and tokens are not an investment asset suitable for retail investors. He was speaking at the Singapore Fintech Festival.
Bitcoin and ethereum hit another all-time high overnight in the U.S.
BitcoinAt 4:09 AM, it was up 2.7% Coindesk reported that Tuesday’s ET price was $68,086.45, ET. Ether — the world’s second-largest digital coin by market value — was up 1.56% and trading at $4,813.94.
Bitcoin has risen 130% this year, while ether has risen 550% during the same time period. Each digital currency has seen dramatic movements over the course of the year.
Hundreds of billions of dollars were wiped off cryptocurrency markets in May this year after Tesla CEO Elon MuskTwitter stated that electric vehicle manufacturer will stop allowing the use of bitcoin to buy its cars.
Menon explained that crypto-token prices aren’t anchored in economic fundamentals. They are also subject to strong speculative swings. These tokens could result in significant losses for investors.”
All over the globe, countries are trying to figure out how to regulate cryptocurrency. at least one country, El Salvador, has adopted bitcoin as legal tender.
Singapore’s approach to cryptocurrency has been open-minded. Menon stated that MAS is convinced that blockchain (a digital ledger that tracks transactions and cannot be changed or deleted) can offer “many benefits.”
He said that crypto tokens could be used to make cross-border payments faster and cheaper, as well as trade financing.
‘No strong case’ for Singapore digital dollar
Menon stated that Singapore has no plans to create a central bank digital currency. It is a digital equivalent of cash.
He stated that “the case for Singapore’s retail CBDC is not urgent.”
There are no strong arguments for nor against retail CBDCs in Singapore, given the subject is controversial.
Ravi Menon
Monetary Authority of Singapore managing director
He argued that physical cash will not disappear, and therefore the demand for a digital Singapore Dollar is no longer necessary.
The central bank’s digital currency can be used to increase financial inclusion and financial access. This is not feasible in Singapore, as a significant proportion of Singaporeans are bank account holders. Meanwhile, electronic payments in Singapore are efficient and cost-effective, he stated.
Menon explained that another reason to have a digital Singapore dollars is to prevent the displacement of the currency when private-issued stablecoins or foreign CBDCs are introduced and made widely available. Digital assets pegged to traditional currencies are called stablecoins.
He said that this scenario was a “remote risk” for the time. There are no strong arguments for or against retail CBDCs in Singapore, given the subject is controversial.
It is not clear if Singaporeans feel comfortable holding physical cash but only bank deposit.
Menon stated that there was no compelling case at the moment for CBDCs being sold in retail.
However, the central banks acknowledged the potential benefits and said they would work with the private sector in developing technology and infrastructure to issue Singapore dollars if necessary.
— CNBC’s MacKenzie Sigalos, Arjun Kharpal and Lora Kolodny contributed to this report.
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