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Navigating the Future of Currency: Singapore’s Stance on Private Cryptocurrencies

In the evolving landscape of digital finance, Singapore’s central bank is charting a course towards a monetary system that embraces innovation while scrutinizing the viability of private cryptocurrencies. According to Ravi Menon, Managing Director of the Monetary Authority of Singapore, private cryptocurrencies that fall short of fundamental financial service tests are destined to exit the monetary stage.

Future of Monetary System- Private Cryptocurrencies

Speaking at a panel discussion on the Future of the Monetary System during an event hosted by the Hong Kong Monetary Authority and the Bank for International Settlements, Menon outlined his vision for a future monetary system grounded in three key components. These components include central bank digital currencies, tokenized bank liabilities, and well-regulated stablecoins. Menon expressed scepticism about private digital coins, stating that they “have miserably failed the test of money because they can’t keep value.” He highlighted a prevalent trend where individuals engage with these currencies for speculative gains rather than as a store of value.

In Menon’s view, private cryptocurrencies, particularly native digital tokens, do not meet the essential criteria for a reliable form of money. He anticipates that these digital currencies will gradually fade from the financial scene, making room for a more robust and regulated financial ecosystem.

In contrast to the perceived shortcomings of private cryptocurrencies, Menon sees promise in stablecoins that are fully backed by high-quality government securities or cash. This shift towards stablecoins is underpinned by their potential to function as “narrow money” and their adaptability for various innovative applications. The emphasis here is on creating a digital asset that is not only stable but also regulated, addressing concerns about volatility and security that have plagued some existing cryptocurrencies.

Meanwhile, in India, M. Rajeshwar Rao, Deputy Governor at the Reserve Bank of India, shared insights into the central bank’s perspective on digital currencies. Rao acknowledged the potential success of central bank digital currencies (CBDCs) if they fulfil unmet user needs and are implemented using accessible existing technology and infrastructure. Data privacy and cybersecurity emerged as critical concerns for Rao, emphasizing the need for CBDCs to instil trust comparable to physical currency.

The Reserve Bank of India has been proactive in piloting CBDCs, with approximately 2.75 million participants involved in the initiative thus far. Rao envisions expanding the scope of CBDCs to include interbank money market transactions, signalling a growing acceptance and exploration of digital currencies within central banking.

As the monetary landscape undergoes transformative shifts, these insights from central banking figures in Singapore and India underscore the imperative to strike a balance between innovation and reliability, ensuring the future of digital currencies aligns with evolving user needs while addressing concerns of privacy and security.

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