“Currency at a Crossroads: Public or Private Digital Currency?

The panel, moderated by Gillian Tett (Financial Times), was composed of:

  • Kristalina Georgieva, Managing Director, International Monetary Fund
  • Roberto Campos Neto, Governor, Central Bank of Brazil
  • Nirmala Sitharaman, Minister of Finance, India
  • Ravi Menon, Managing Director, Monetary Authority of Singapore

Watch the full roundtable video here .

Summary of Ravi Menon’s remarks

A crypto-asset or token consists of digitally representing anything that we consider to be of value, by putting encryption around it on a distributed ledger, where ownership of the asset can be established and verified, and it can be transferred safely.

In Singapore and at MAS, we are excited about the potential for building a crypto or tokenized economy.

Cryptocurrencies, which generate so much excitement, are just one part of the crypto ecosystem or economy comprising a variety of tokenized assets. Cryptocurrencies are cryptographic assets that perform a payment function and attempt to imitate money. Private cryptocurrency is unlikely to perform the functions of money because its value is unstable and it is not backed by the central bank or the government.

Stablecoins are pegged to a fiat currency and therefore derive stability, but it is not clear that all stablecoins, which claim to have a backing, are in fact adequately backed. Without such support, it is difficult to imagine how they will fulfill the function of money. Stablecoins will become a more prominent feature as long as their support is strong. They could potentially challenge the currencies of some smaller emerging economies. If widely used, they could lead to currency substitution and the potential loss of monetary sovereignty in these countries.

When it comes to central bank digital currencies (CBDCs), MAS makes a careful distinction between wholesale CBDCs and retail CBDCs. Both are digital currencies issued by the central bank.

For wholesale CBDCs, MAS sees a variety of potential use cases. They can be used in the interbank system on a decentralized ledger to facilitate cross-border payments and transactions. MAS has had successful experiences with industry and other central banks on wholesale CBDCs. It’s an interesting development to watch. Most impactful use cases will be in wholesale CBDCs for, for example, cross-border payments and cross-border trade finance.

For retail CBDCs, MAS keeps an open mind. We want to ensure that we have the technology, governance and political structures to launch a retail CBDC, if needed. But there doesn’t seem to be a compelling case yet, given that the current digital payment system is already effective and efficient at moving money.

The regulatory approach that MAS has taken towards crypto-assets or tokens distinguishes the different types of these tokens. If a crypto token is offered as security with an expectation of return, it is regulated under the Securities and Futures Act. If a digital token is offered as a payment instrument, it is regulated by the Payment Services Act, which emphasizes anti-money laundering and technology risk management, and increasingly, customer protection.

MAS examines the underlying activity, as well as the nature and quality of the crypto asset, to determine the specific risk it poses. We are adapting our regulations to focus on these risks. We hold digital payment token licensees to the same high anti-money laundering standards that we hold banks to. But we don’t regulate them like banks because they don’t do anything other than banks. Payment service providers generally have a lighter regulatory regime than banks. It gives them more leeway and space to innovate, and yet, for the risks they pose, we hold them to the same high standard.