MAS shuns idea of issuing digital currencies to public

Singapore

THE Monetary Authority of Singapore (MAS) is avoiding the issuance of digital currencies to the public at this point, with the managing director of the central bank noting the risks associated with doing so.

Speaking at a UBS event on Monday, MAS managing director Ravi Menon said: "I'm not sure that's a good idea. I'm not ruling it out, but I can't see why you'd want to do that, because that completely disintermediates the banks."

Mr Menon was responding to a question from Tan Min Lan, head of APAC chief investment office, UBS Wealth Management, on whether the central bank would issue digital currencies to the public. The dialogue session was part of the UBS Wealth Insights forum held in Singapore.

Mr Menon said during times of stress, the issuance of digital currencies can cause a bank run, as people rush to put everything into digital currencies at the central bank instead.

But the central bank is keen to explore the use of digital currencies as a means of improving the settlement process within the banking system. As part of MAS's blockchain experiment, it issued a digital currency that held no stored value.

Cryptocurrencies can be used as an incentive for users to power some types of blockchain, but in fact, many applications of blockchain technology do not depend on cryptocurrencies to function.

This has not stopped speculative money from pouring into cryptocurrencies. One case in point is dogecoin, a parody cryptocurrency linked to a meme about Shiba Inu dogs. There were enough people who did not cotton on to the joke to push dogecoin's value to some US$2 billion earlier this month, leaving the dogecoin founder himself dumbfounded.

Mr Menon said: "The question is, does it (cryptocurrency) have a life of its own, as a means of exchange and as a store of value? The irony is that cryptocurrency is not a currency." He noted that cryptocurrency is neither legal tender, not reflects liability of any particular party.

"The use of cryptocurrency as an instrument of investment or shall I say, speculation - that is not technology. That is like Dutch tulips," he said, adding that the central bank remains concerned about this "speculative dimension". Dutch tulips refer to one of the earliest market bubbles when Tulipmania drove prices to extraordinary levels before they crashed in 1637.

"I do hope that when that fever has gone away, when the crash has happened, it will not undermine the much deeper and more meaningful technologies associated with digital currencies and blockchains."

READ MORE: Goldilocks economy tiptoes around three grumpy bears