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Singapore central bank MAS calls out crypto risks, speculative swings


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Signage for the Monetary Authority of Singapore (MAS) is displayed 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 swings” and potential risks for retail investors who put their money in cryptocurrencies.

The Monetary Authority of Singapore “frowns on cryptocurrencies or tokens as an investment asset for retail investors,” said Ravi Menon, its managing director, who was speaking to those at the Singapore Fintech Festival.

Bitcoin and ethereum hit another all-time high overnight in the U.S.

Bitcoin was up 2.7% at about 4:09 a.m. ET on Tuesday at $68,086.45, according to Coindesk. Ether — the world’s second-largest digital coin by market value — was up 1.56% and trading at $4,813.94.

Bitcoin is up 130% so far this year and ether is up 550% in that same period. Both digital currencies have seen wild movements throughout the year.

Hundreds of billions of dollars were wiped off cryptocurrency markets in May this year after Tesla CEO Elon Musk tweeted that the electric vehicle maker would stop allowing the use of bitcoin to buy its cars.

“The prices of crypto tokens are not anchored on any economic fundamentals, and are subject to sharp speculative swings,” Menon said. “Investors in these tokens are at risk of suffering significant losses.”

Countries around the world are grappling with how 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 altered or deleted, and crypto tokens can bring “many potential benefits.”

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One potentially strong use case is for crypto tokens to facilitate cheaper and faster cross-border payments and trade finance, he said.

‘No strong case’ for Singapore digital dollar

Singapore is in no hurry to develop a central bank digital currency for retail use, Menon said, describing it as a digital version of cash.

“The case for a retail CBDC in Singapore is not urgent,” he said.

For a subject that is so controversial and has attracted so much attention, there are neither strong reasons for or against a retail CBDC in Singapore.

Ravi Menon

managing director, Monetary Authority of Singapore

Physical cash is not going anywhere, so the need for a digital Singapore dollar is “moot at this point,” he argued.

A central bank digital currency has benefits such as financial inclusion, or expanding access to financial services. But that’s “not compelling” in Singapore since 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 guard against the potential displacement of the local currency as privately issued stablecoins and foreign CBDCs enter the market and become widely accessible, Menon said. Stablecoins are digital assets that are pegged to traditional currencies.

Still, that scenario is a “remote tail risk” at the moment, he added. “For a subject that is so controversial and has attracted so much attention, there are neither strong reasons for or against a retail CBDC in Singapore.”

Read more about cryptocurrencies from CNBC Pro

There’s also the question of whether people in Singapore are comfortable with holding only bank deposits and not physical cash.

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“For now, there is no strong case for a retail CBDC,” said Menon.

That said, the central bank acknowledged that there are potential benefits, and will work with the private sector to develop technology and infrastructure needed to issue a Singapore dollar if the authorities decide to do so in future, he said.

— CNBC’s MacKenzie Sigalos, Arjun Kharpal and Lora Kolodny contributed to this report.


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