• The issuing body warns those who invest in private digital assets about the risks of incurring “significant losses” due to their volatility.
• Ravi Menon is the managing director at the central bank and says that while a CBDC can have great benefits, it’s not advisable to rush creating one.

Singapore’s central bank and financial regulator is not happy with the increasing use of private cryptocurrency as a means of value and payment in Singapore and around the globe.

Warnings were issued by the agency this week regarding risks that retail investors face. It said that being subjected to “strong speculative swings,” those who invest in cryptocurrencies can lose their money, CNBC reported.

Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), which serves as the central bank, said the body “disapproves of cryptocurrencies or tokens as an investment asset for retail investors.”

Menon stated that during a talk at the Singapore Fintech Festival:

The prices of crypto tokens are not based upon economic fundamentals, and they are susceptible to large speculative swings.
Later, he added:

These tokens can cause significant loss to investors.

Volatility of BTC/ETH

On Monday both and , the world’s two largest cryptocurrencies, climbed to all-time highs again. BTC closed at $68,000, but then dropped to $67.442 on Wednesday at 9:40 EST. After trading at $4813.94 the previous day, Ether traded at $4,784.95 the following day.

BTC increased by 130% this year, and ETH rose 550%. These abrupt movements led Singapore’s issuer to question the stability and reliability of major cryptocurrencies.

This year, private digital currencies are under significant speculative pressure. Twitters by Tesla (NASDAQ) CEO Elon Musk, who stated last February that Tesla would accept Bitcoin payments for its vehicles. This influenced the BTC price. Then, in May, Musk claimed that Tesla no longer would accept bitcoin payments for its cars, which caused a devastating crash.

Other events such as Coinbase’s IPO in April marked a before and after for the industry and for cryptocurrencies in general. China ban cryptocurrency in April, declaring that they lack value and their prices fell.

Flipside

• The truth is that the majority of the world’s governments, after issuing similar warnings and doubting the future of BTC and other cryptos, have ended up accepting their operations and now seek to generate a regulatory framework.
• El Salvador and other countries have adopted BTC to be legal tender.

The paradox is that despite his criticism of cryptocurrencies, Menon believes that blockchain technology and digital tokens can generate “many potential benefits.”

The official stated that cryptocurrency could be used to reduce the costs of cross-border transactions and to make credit more affordable.

No rush for a Singapore digital dollar

Singapore seems to not be pressing ahead with the creation of a digital currency central bank (CBDC), as some other countries have done. The central bank head said that “the case of a retail CBDC in Singapore is not urgent.”

Menon agreed with his statement, stating that while the topic is controversial and sensitive, the government has not yet provided solid reasons to either support or reject it. However, he specified that physical cash has its days numbered, which is why the issuance of a digital dollar is “debatable at this time.”

He does not dispute the advantages of fiat currency digital currencies, such as improving financial inclusion and access to more financial services. But he asserted that this is still not entirely “convincing” for the government.

He said that some users still use traditional bank accounts. He stated that Singapore’s electronic payments system is efficient and very competitive.

An official stated that the only reason to create a digital dollars would be to protect private stablecoins, CBDCs from foreign countries and prevent them from displacement of the Singapore dollar (SGF).

He fears that in the future, as digital currencies in general enter the market and access to them expands, the SGF’s competition will grow a lot. But he thinks that this risk scenario is not likely to occur.

Why you should care

• No matter whether they are in agreement with cryptocurrency, the government does not doubt the benefits of blockchain technology or the increased competition of digital assets on the market.

Ravi Menon indicated that he was going to work with Singapore’s private sector on the issue of digital currencies. If the government decides so, it could happen.

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