The Monetary Authority of Singapore (MAS) signage is posted outside the Central Bank’s headquarters in Singapore.
Sam Kang Li | Bloomberg | Getty Images
SINGAPORE – Singapore’s central bank and financial regulator warned Tuesday of “sharp speculative fluctuations” and potential risks for small investors who invest their money in cryptocurrencies.
The Monetary Authority of Singapore “despises cryptocurrencies or tokens as fixed assets for private investors,” said Ravi Menon, its managing director, who spoke to attendees at the Singapore Fintech Festival.
Bitcoin and Ethereum hit another all-time high in the US overnight
Bitcoin rose 2.7% to $ 68,086.45 around 4:09 a.m. ET on Tuesday, according to Coindesk. Ether – the world’s second largest digital coin by market value – rose 1.56% to trade at $ 4,813.94.
Bitcoin is up 130% so far this year and ether is up 550% over the same period. Both digital currencies have seen wild moves over the year.
Hundreds of billions of dollars were wiped off the cryptocurrency markets in May this year after Tesla CEO Elon Musk tweeted that the electric vehicle maker would stop using Bitcoin to buy its cars.
“The prices of crypto tokens are not anchored to economic fundamentals and are subject to strong speculative fluctuations,” said Menon. “Investors in these tokens run the risk of suffering significant losses.”
Countries around the world are struggling to regulate cryptocurrencies, and at least one country, El Salvador, has adopted Bitcoin as legal tender.
Singapore has taken a relatively open approach to cryptocurrencies. Menon said MAS believes that blockchain, a digital ledger that records transactions that cannot be changed or deleted, and crypto tokens can bring “many potential benefits”.
A potentially strong use case is crypto tokens to enable cheaper and faster cross-border payments and trade finance, he said.
“Not a strong argument” for Singapore’s digital dollar
Singapore is in no rush to develop a retail central bank digital currency, Menon said, describing it as the digital version of cash.
“The case for a retail CBDC in Singapore is not urgent,” he said.
Physical cash is not going anywhere, so the need for a digital Singapore dollar “is debatable at this point,” he argued.
A digital central bank currency has advantages such as financial inclusion or expanded access to financial services. But that is “not mandatory” in Singapore as a high proportion of Singaporeans have bank accounts, while electronic payments in the country are “pervasive, highly efficient and competitive,” he said.
Another reason for a digital Singapore dollar is to protect against possible displacement of the local currency when privately issued stablecoins and foreign CBDCs hit the market and become widely available, Menon said. Stablecoins are digital assets that are tied to traditional currencies.
Nevertheless, this scenario is currently a “remote tail risk”, he added. “On an issue that is so controversial and has received so much attention, there are no valid reasons for or against a CBDC for retail in Singapore.”
The question also arises as to whether the people of Singapore are okay with only holding bank deposits and no physical cash.
“At the moment there are no compelling arguments in favor of a retail CBDC,” said Menon.
However, the central bank acknowledged that there were potential benefits and would work with the private sector to develop the technology and infrastructure needed to issue a Singapore dollar if authorities so choose in the future, he said.
– MacKenzie Sigalos, Arjun Kharpal and Lora Kolodny from CNBC contributed to this report.