The central bank of Singapore warned about the risk that investing in cryptocurrencies poses due to their high instability. Although CBDCs could facilitate cross-border payments and trade financing, Menon stated that the country does not consider them urgent.
The central bank and the financial regulators of Singapore recently expressed their concerns about cryptocurrencies. They alerted about sharp speculative swings and the high risk for retail investors who put their money in that market.
Ravi Menon, the managing director of the Monetary Authority of Singapore, expressed that they disapprove of cryptocurrencies and tokens as investment assets.
Bitcoin (BTC) is trading at around USD 64,300 and has accumulated a profit of 4.6% in the past week. Meanwhile, Ether (ETH) is worth approximately USD 4,635 and has grown by 1.9% in the same period, according to CoinGecko.
Unlike Bitcoin, which has grown by 132% during 2021, Ether has increased by 553% in the same period. However, the two decentralized cryptocurrencies have experienced significant volatile movements.
The cryptocurrency market lost billions of USD dollars during the first half of the year due to a post from Elon Musk on Twitter. The CEO of Tesla said that the electric car company would stop accepting Bitcoin as payment for its vehicles.
Menon stated that no economic fundamentals are the basis for the price of cryptocurrencies, which are subject to sharp speculative swings. Therefore, he believes that retail investors in these assets are at risk of losing significant amounts of money.
Many other countries are currently looking for ways to regulate cryptocurrencies like Bitcoin and Ether. However, El Salvador has taken the initiative by being the first to adopt Bitcoin as legal tender.
Singapore Expresses Its Stance on CBDCs
Ravi Menon said that Singapore is in no rush to develop a central bank digital currency for retail use. The official described CBDCs as a digital version of fiat currencies such as the US dollar (USD) and the Singapore dollar (SGD).
The managing director of the Monetary Authority of Singapore said that a retail CBDC in Singapore is not urgent. However, he stated they have a potential use case for facilitating cheaper and faster cross-border payments or trade financing.
Menon considers that physical cash is going nowhere, for which the need for a digital Singapore dollar is debatable.
A central bank digital currency offers benefits such as financial inclusion and expanded access to different financial services, said Menon. However, he noted that this is not a compelling reason in Singapore since many citizens have electronic bank accounts. At the same time, he highlighted that electronic payments in the Asian country are widespread, highly efficient, and competitive.
According to Menon, another reason to create a digital Singapore dollar is to guard against the possible replacement of the local fiat currency. That is particularly relevant when foreign stablecoins and CBDCs enter the market and become widely accessible.
Furthermore, Menon mentioned the issue of whether people in Singapore are comfortable with having only electronic bank deposits instead of physical cash.
To conclude, the Monetary Authority of Singapore recognized the potential benefits of a CBDC, but there is not a high demand for the asset. Menon added that the central bank would work with the private sector to develop a digital Singapore dollar if regulators require it.
By Alexander Salazar
