Singapore's MAS rules out retail central bank digital currencies - for now

Managing director Ravi Menon also reiterated its stance on cryptocurrencies’ speculative nature and their risks to retail investors.
Singapore's MAS rules out retail central bank digital currencies - for now

The Monetary Authority of Singapore (MAS) recognises the potential for wholesale central bank digital currencies (CBDCs), but “does not see a compelling case for retail CBDCs in Singapore”, Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), said.

He also addressed concerns by some observers about the MAS’ perceived contradictory messages about cryptocurrencies during a keynote interview on Monday (Aug 29) at a Green Shoots seminar, a series of sessions organised under the Singapore Fintech Festival.

“Some have lamented that MAS has made a ‘u-turn’ in its digital asset policies.  They say that MAS was once ‘making pro-crypto decisions’ but was now being ‘overly cautious and losing its appeal as a global crypto hub’,” he said.

However, he said that cryptocurrencies are “just one part of the entire digital asset ecosystem” and “that public and media attention has tended to focus on cryptocurrencies”.

Within the digital asset ecosystem, there exist concepts such as cryptocurrencies, tokenisation, distributed ledgers and blockchain.

Generally, the MAS sees strong potential and is actively promoting the digital asset ecosystem, which can facilitate more efficient transactions, enhance financial inclusion, and unlock economic value.

Cryptocurrencies specifically, however, have “taken a life of their own”. Because their prices have no correlation to the underlying economic value of their use, investors are highly speculative and prices are extremely volatile, which rules them out as a viable form of investment asset, he said.

When it comes to CBDCs, MAS sees potential for wholesale CBDCs, especially for cross-border payments and settlements, but has no plans to issue a retail CBDC currently.

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Wholesale CBDCs are contained within the banking system and are currently used for cross-border transactions, while retail CBDCs are issued to members of the public who have an account with the central bank.

“But there does not seem to be a compelling case for [retail CBDCs] yet. Its use cases are not clear, given that today’s digital payment system is already effective and efficient in transferring money,” he said. “Most of our money is already in digital form in the form of bank deposits, and it is not inconceivable that many countries will come down to very low usage of cash.”

His comments are a slight departure – or an evolution, you could say – from the MAS’ white paper last year that concluded: “a well-designed retail CBDC could have unique value propositions in the future economy”.

Even so, MAS is keeping the door to retail CBDCs open a crack, in the situation where the need for one arises – as could be possible in the fast-changing world of digital assets.

“Although we do not have the intention to issue one, we will have to be conscious of the risks, if we eventually do issue one. We are, in a sense, rehearsing for the future. We want to make sure we have the technology, governance, and policy structures to launch a retail CBDC, if necessary,” Menon said.

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