MAS' Director Declares Cryptocurrencies a Fail in Digital Money Test

• Futures of Stablecoins and Central Bank Digital Currencies
• Four Contenders for Digital Currency
• Examples of Promising Stablecoins
• Project Guardian
• The Vision for the Future
• Role of Singapore in Digital Asset Infrastructure
• The Global Layer One Initiative
• Purpose of FinTech

Futures of Stablecoins and Central Bank Digital Currencies

The future financial ecosystem will include central bank digital currencies (CBDCs) and stablecoins rather than cryptocurrency, according to the director of the Central Bank of Singapore. This statement was made during the director's keynote speech at the Singapore Fintech Festival.

Four Contenders for Digital Currency

Ravi Menon, the director, identified four major players in the digital currency landscape. These are privately issued cryptocurrencies, CBDCs, tokenized bank liabilities, and well-regulated stablecoins. However, cryptocurrencies have not met the requirements of digital money, according to Menon. They have shown poor performance as a medium of exchange or store of value, their prices are subject to high speculative swings, and numerous cryptocurrency investors have suffered significant losses.

Examples of Promising Stablecoins

During his speech, Menon highlighted StraitsX's stablecoin and Paxos Digital's new USD-pegged stablecoin as examples of promising digital currencies. While Singapore has established itself as a crypto hub in Asia, regulators would prefer the country to be recognized as a digital assets hub. This was emphasized by Menon, who pointed out various uses for the technology apart from crypto speculation.

Project Guardian

Menon pointed out Project Guardian, a project lead by the MAS and industry partners. This project is focused on tokenizing foreign exchange, bonds, and funds to enhance global liquidity, streamline cross-border transactions, and improve operational efficiency in financial markets. Several major global banks are currently testing this project.

The Vision for the Future

Menon envisions a network of interoperable systems that enable payment, clearing, and settlement to occur instantly and seamlessly. According to him, digital assets have two key features that can fundamentally transform the nature of financial transactions.

Role of Singapore in Digital Asset Infrastructure

Existing digital asset networks, including public permissionless blockchains and private permissioned blockchains, have limitations including lack of accountability, legal uncertainty, and interoperability issues. This restricts their suitability as a global digital asset infrastructure. In response to this, the Monetary Authority of Singapore (MAS) is launching the Global Layer One (GL1) initiative.

The Global Layer One Initiative

GL1 is designed as a global public good, said Menon. He added that it will facilitate seamless cross-border transactions and enable tokenized assets to be traded across global liquidity pools while complying with relevant regulatory requirements.

Purpose of FinTech

The GL1 initiative is part of Singapore's effort to ensure that FinTech serves a larger purpose beyond just profit, according to Menon. He stressed that FinTech should aim to solve real-world problems and improve people's lives. He noted that together, digital assets, digital money, and foundational digital infrastructure can help achieve the vision of seamless financial transactions across the globe.

Edited by Jonathan Stoker