Central Bank of Singapore Claims Cryptocurrencies Are Dangerous for Retail Investors
- The issuing body warns those who invest in private digital assets about the risks of incurring “significant losses” due to their volatility.
- The managing director of the central bank, Ravi Menon, says that although a CBDC has great potential benefits, there is no rush to create one.
The central bank and financial regulator of Singapore does not like the growing trend towards the adoption of private cryptocurrencies as instruments of payment and value in the country and in the world.
The agency issued warnings this week about the risks to which retail investors are exposed. It said that being subjected to “strong speculative swings,” those who invest in cryptocurrencies can lose their money, CNBC reported.
Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), which serves as the central bank, said the body “disapproves of cryptocurrencies or tokens as an investment asset for retail investors.”
During a lecture at the Singapore Fintech Festival, Menon said that:
"Crypto token prices are not based on any economic fundamentals and are subject to strong speculative swings."
He later added that
"investors in these tokens run the risk of suffering significant losses."BTC and ETH Volatility
On Monday both Bitcoin and Ethereum, the world’s two largest cryptocurrencies, climbed to all-time highs again. During the day, BTC traded at $68,000 and then fell 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 has increased 130%, while ETH has climbed 550%. These sudden movements are what led the Singapore issuer not to trust the stability of the main cryptocurrencies.
Private digital currencies have been under heavy speculative pressure this year. Tweets from Tesla CEO Elon Musk last February saying that Tesla would accept Bitcoin payment for its cars influenced the price of BTC. But then in May, he claimed that Tesla would no longer do so, causing a brutal crash.
Other events such as Coinbase’s IPO in April marked a before and after for the industry and for cryptocurrencies in general. Subsequently, China banned cryptocurrencies, saying they lacked real value, and their price fell again.
On The Flipside
- The truth is that the majority of the world’s governments, after issuing similar warnings and doubting the future of BTC and other cryptos, have ended up accepting their operations and now seek to generate a regulatory framework.
- Some countries like El Salvador have gone further in the bet and adopted BTC as legal tender.
The paradox is that despite his criticism of cryptocurrencies, Menon believes that blockchain technology and digital tokens can generate “many potential benefits.”
According to the official, cryptocurrencies could serve to streamline the cross-border payment system and make commercial credit cheaper.
No rush for a Singapore digital dollar
Regarding the creation of a central bank digital currency (CBDC) as other countries are doing, Singapore appears to be in no rush. The central bank head said that “the case of a retail CBDC in Singapore is not urgent.”
Menon backed up his comment stating that the issue is sensitive and controversial, and the government still has no solid reasons either for or against. However, he specified that physical cash has its days numbered, which is why the issuance of a digital dollar is “debatable at this time.”
The managing director of the issuing institute does not doubt the benefits of fiat digital currencies such as financial inclusion or improving access to financial services in the country. But he asserted that 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 payments system in Singapore is widespread, highly efficient, and competitive.
The official noted that a valid reason to issue a digital dollar would be to prevent private stablecoins and CBDCs from other countries from displacing the Singapore dollar (SGF).
He fears that in the future, as digital currencies in general enter the market and access to them expands, the SGF’s competition will grow a lot. However, he believes that such a risk scenario is remote for now.
Why You Should Care?
- Whether or not they agree with cryptocurrencies, no government doubts the potential benefits of blockchain technology and the increasing competitiveness of private digital assets in the market.
Ravi Menon said, finally, that he will work on this issue with the Singaporean private sector to begin exploring the development of a digital currency, which he does not deny could be issued in the future, if the government so decides.
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Market News, CBDC, Central Bank of Singapore, CryptocurrencyRead More
OhNoCrypto
via https://www.ohnocrypto.com
, Khareem Sudlow
