Singapore’s Central Bank Predicts the Demise of Private Crypto

Monetary Authority of Singapore (MAS) Managing Director Ravi Menon has made a bold prediction regarding the future of private digital coins, asserting that they are destined to fade away from the monetary landscape. Speaking at a panel discussion hosted by the Hong Kong Monetary Authority and the Bank for International Settlements on November 28, Menon criticized private cryptocurrencies for their failure to meet essential financial service tests.

Failure to Uphold Consistent Value

Menon emphasized that private digital currencies, including native digital tokens, have fallen short of the fundamental test of money due to their inability to maintain a consistent value. He pointed out that these cryptocurrencies often serve as vehicles for quick financial gains rather than being reliable instruments for long-term savings. This volatility and unreliability, according to Menon, disqualify private cryptocurrencies from inclusion in the future monetary framework.

Menon outlined his vision for a monetary system built on three main elements: Central bank digital currencies (CBDCs), tokenized bank liabilities, and well-regulated stablecoins. He expressed optimism about the potential of stablecoins, especially those fully backed by high-quality government securities or cash, to provide stability and reliability as a form of narrow money.

Regulatory Actions and Emphasis on Stablecoins

Menon’s predictions align with recent regulatory actions in Singapore. In mid-November 2023, MAS introduced a regulatory framework for single-currency stablecoins, focusing on criteria such as value stability, capital, redemption at par, and disclosure of audit results. Only stablecoin issuers meeting these criteria can apply for their stablecoins to be recognized as “MAS-regulated stablecoins.”

The Deputy Governor of the Reserve Bank of India (RBI), Rajeshwar Rao, shared an optimistic view on the success of CBDCs. Rao believes that CBDCs could thrive if they fulfill unmet user needs and leverage existing technology and infrastructure. The RBI has already initiated a CBDC pilot with around 2.75 million participants, with potential expansion into interbank money market transactions. Rao also suggested the possibility of implementing CBDCs on a multilateral basis in the future.