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Singapore favors wholesale CBDC. May restrict cryptocurrency access, but not ban it

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In a speech today, Ravin Menon, Managing Director of the Monetary Authority of Singapore (MAS), clarified the central bank’s position on digital assets, central bank digital currencies (CBDC) and cryptocurrencies. 

Wholesale CBDC is viewed as having good potential, in line with the Project Dunbar initiatives for cross border payments, but it sees little need for a retail CBDC for now. The regulator wants to further address consumer speculation in cryptocurrencies.

MAS approach to crypto, digital assets

In January, MAS imposed restrictions on cryptocurrency promotion and banned crypto ATMs. But Menon said this has failed to curb speculation. 

He clarified that the central bank views two functions of crypto as paying for network transaction fees and incentivizing users, including keeping the network secure. However, a significant proportion of crypto activity is speculation that has “nothing to do with any underlying economic value related to their use on the distributed ledger,” said Menon.

Hence MAS is considering adding ‘frictions’ such as customer suitability tests and restricting access to credit and leverage. But he ruled out an outright ban.

He is concerned about deceptive cryptocurrency market practices influencing prices and volumes and says it will enhance regulations.

By October, MAS plans to consult on steps to minimize harm to consumers from crypto and ensure that stablecoins are appropriately regulated to achieve their potential benefits.

Emphasis on wholesale and corporate blockchain applications

Regarding the type of innovation MAS wants to encourage, the regulator clarified that it is particularly interested in enabling digital assets that involve tokenizing financial and real world assets, such as bonds or real estate.

At the same time, it is embracing public blockchains, as evidenced by Project Guardian, an initiative that involves both TradFi and DeFi by tokenizing bonds on a public blockchain. It involves MAS, JP Morgan, DBS Bank and Marketnode, the SGX joint venture for tokenized bonds. Today Menon mentioned the involvement of Japan’s SBI.

Most of the initiatives mentioned target institutions and corporates, such as Marketnode, the Partior payments joint venture involving JP Morgan, DBS and Temasek, and the Contour trade finance platform backed by numerous banks. One crypto company mentioned is Nansen, a blockchain analytics firm backed by GIC, the Singapore investment firm that manages government reserves.

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