In about 4 yrs: Retail payments across Asean via mobile numbers

Singapore

OVER the next four years or so, Singapore will work with other Asean countries to link up their real-time payment systems to enable small retail payments using just mobile numbers, with the link-up between Singapore and Thailand expected to be completed by the middle of next year, said Monetary Authority of Singapore (MAS) chief Ravi Menon.

But with large cross-border business payments still cumbersome and costly, a new form of cryptocurrency known as stablecoins, as popularised by Facebook's Libra, is a "competing potential solution", said Mr Menon.

To be sure, while Mr Menon said Singapore will take an open mind towards stablecoins - cryptocurrencies that are pegged to a basket of fiat currencies, securities, or commodities, so as to reduce the price volatility of these cryptocurrencies - the regulators here are also concerned by the destabilising risks posed by these new inventions.

"We keep an open mind towards these stablecoins, but we want to engage in a much deeper discussion about how the risks can be managed."

This comes as Facebook's brand of stablecoins, launched under a group known as the Libra Association, may be pegged to currencies such as the Singapore dollar, the greenback and the euro, the social-media giant had said over the last few months.

Mr Menon said more stablecoins are expected to be launched, and regulators can get "creative" in how existing regulations are extended to these newfangled players to address risks of money laundering and terrorist financing, as well as to ensure consumer protection.

"I think the more existential questions that stablecoins pose relate to financial stability and monetary policy, rather than regulation and supervision," he said.

"If these stablecoins gain in prominence, then the currencies to which they are pegged will inevitably be affected, because the demand and supply of these coins will translate into demand and supply for these underlying fiat currencies."

This means if the Singapore dollar were to be in the basket used by a stablecoin on a weighted basis, and that stablecoin is used in turn widely for international commerce, the demand for the Singapore dollar will be affected by the demand for the stablecoin. That impact will also come from activities that are wholly unrelated to the Singapore economy, Mr Menon said.

Such questions are a bigger issue for markets such as Singapore that manage monetary policy on the basis of the exchange rate, but will likewise be a concern for most emerging economies. The impact on capital flows could potentially be destabilising, said Mr Menon.

Meanwhile, MAS and Bank of Canada are continuing their experiments on using a blockchain platform to test cross-border payments.

The partners are now reaching out to fintech companies to test the technology for payment needs such as in trade finance.

The experiments thus far have shown that the technology works, said Mr Menon. But even then, the platform is still a few years away from becoming scalable and economically viable, he added.

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