In a wide-ranging speech on Monday, the Managing Director of the Monetary Authority of Singapore (MAS), Ravi Menon, reiterated MAS' intention to develop a thriving digital asset ecosystem in Singapore while taking steps to curb cryptocurrency speculation. The speech touched on a number of important topics including use cases for distributed ledger technology (DLT), cryptocurrency speculation, stablecoins, CBDCs, and market manipulation in cryptocurrency markets.
For several years, Singapore has been near the forefront in adopting digital assets, introducing a licensing regime for digital payment token services and encouraging a range of digital asset projects, including custodial services and CBDC initiatives. However, more recently, there has also been significant industry concern about mixed signals from the MAS about digital assets.
Mr Menon noted these concerns in his speech and stated that Singapore's focus on innovation and regulation should not be viewed as contradictory. He stated:
Our vision is to build an innovative and responsible digital asset ecosystem in Singapore.
Mr Menon identified a four-pronged approach to achieving this vision:
exploring the potential of DLT in promising use cases;
supporting the tokenisation of financial and real economy assets;
enabling digital currency connectivity; and
anchor players with strong value propositions and risk management.
Menon also reiterated the MAS' recent tough line on cryptocurrency speculation:
cryptocurrencies have taken on a life of their own outside of the distributed ledger - and this is the source of the crypto world's problems...This speculation in cryptocurrencies is what MAS strongly discourages and seeks to restrict.
Menon confirmed that the MAS is considering additional measures to curb speculation in cryptocurrency markets including:
adding friction on retail access to cryptocurrencies;
customer suitability tests;
restricting the use of leverage and credit facilities for cryptocurrency trading;
regulation of market manipulation in cryptocurrency markets.
Menon added that there is no use banning retail access to cryptocurrencies due to the borderless environment in which they exist but imposing restrictions is more appropriate, similar to how Canadian crypto exchanges Bitbuy and Newton imposed limitations on the annual purchases of their customer's crypto.
He went on to indicate the MAS' support for projects involving:
the tokenisation of financial and real economy assets;
the use of stablecoins that are securely backed by high quality reserves and well regulated;
wholesale CBDCs, especially for cross-border payment and settlements.
Interestingly, Mr Menon stated that MAS does not see a compelling case for a retail CBDC in Singapore, but is nevertheless building the technology infrastructure that would permit the issuance of a retail CBDC should conditions change.
Menon's speech gave a candid insight into the MAS' thinking on digital assets and future plans to promote and regulate digital assets and cryptocurrencies. We expect his comments will be weighed with interest far beyond Singapore as policymakers and regulators continue to grapple with a wide range of policy challenges in relation to digital assets.