Singapore's central bank and financial regulator does not like the growing trend towards the adoption of private cryptocurrencies as means of payment and value in the country and around the world.
The agency issued warnings this week about the risks retail investors are exposed to. He said that by being subject to "strong speculative swings," those who invest in cryptocurrencies can lose their money, CNBC reported.
Ravi Menon, chief executive of the Monetary Authority of Singapore (MAS), which acts as the central bank, said the body "frowns on cryptocurrencies or tokens as an investment asset for retail investors."
During a conference at the Singapore Fintech Festival, Menon stated that: "The prices of crypto tokens are not based on any economic fundamentals and are subject to strong speculative fluctuations".
He later added that: "Investors in these tokens run the risk of suffering significant losses."
Volatility of BTC and ETH
Both Bitcoin and Ethereum, the two largest cryptocurrencies in the world, returned to all-time highs on Monday. During the day, BTC was trading at $ 68.000 before dropping to $ 67.442 at 9:40 am EST on Wednesday. Ether reached a price of $ 4.784,95 at the same time, after trading at $ 4.813,94 the day before.
This year BTC is up 130%, while ETH is up 550%. It would be good to take advantage of it by investing through established platforms such as Bitcoin Pro. These sudden movements are what led the Singapore issuer to not trust the stability of the major cryptocurrencies.
Private digital currencies have come under severe speculative pressure this year. Tweets from Tesla CEO Elon Musk last February that Tesla would accept payment of Bitcoin for its cars influenced the price of BTC. But then, in May, he claimed Tesla would never do it again, resulting in a brutal accident.
Other events like Coinbase's IPO in April have marked a before and after for the industry and for cryptocurrencies in general. Subsequently, China banned the cryptocurrencies, claiming they lacked real value and their price dropped again.
No rush for a Singapore digital dollar
As for creating a central bank digital currency (CBDC), as other countries are doing, Singapore doesn't seem to be in a rush. The head of the central bank said that "the case of a retail CBDC in Singapore is not urgent".
Menon confirmed his comment by stating that the issue is sensitive and controversial and the government still has no solid reasons for or against. However, he specified that physical money has its days numbered, which is why the issuance of a digital dollar is "moot right now".
The CEO of the issuing institution does not doubt the benefits of digital fiat currencies such as financial inclusion or improved access to financial services in the country. But he said this is still not entirely "convincing" for the government.
He argued that a large number of users still have traditional bank accounts. He explained that the electronic payment system in Singapore is widespread, highly efficient and competitive.
The official noted that a compelling reason to issue a digital dollar would be to prevent private stablecoins and CBDCs from other countries from replacing the Singapore dollar (SGF).
He fears that in the future, as digital currencies in general enter the market and access to them expands, competition from SGF will grow a lot. However, he believes such a risk scenario is remote for now.
