Ravi Menon, the Managing Director of the Monetary Authority of Singapore (MAS), has predicted the fate of private digital coins, including native digital tokens, in the future monetary system.
Speaking at a November 28 panel discussion jointly hosted by the Hong Kong Monetary Authority and the Bank for International Settlements, Menon declared that private cryptocurrencies would eventually fade from the monetary scene, citing their failure to meet essential financial service tests.
According to Menon, private digital currencies have failed the fundamental test of money due to their inability to maintain consistent value.
He pointed out that these cryptocurrencies are often used for quick financial gains rather than long-term savings, marking them as unreliable and unstable for inclusion in the future monetary framework.
Menon envisions a monetary system composed of three main elements: Central bank digital currencies (CBDCs), tokenized bank liabilities, and well-regulated stablecoins.
He emphasized the potential of stablecoins, particularly those fully backed by high-quality government securities or cash. He also believes these stablecoins could function as narrow money, providing stability and reliability.
Menon’s remarks align with Singapore’s recent regulatory actions targeting stablecoins. In mid-November 2023, MAS unveiled a regulatory framework for single-currency stablecoins, focusing on value stability, capital, redemption at par, and disclosure of audit results.
This framework stipulates that only issuers meeting these criteria can apply for their stablecoins to be recognized as “MAS-regulated stablecoins.” Singapore’s financial regulator also has plans to launch a live pilot of a CBDC for wholesale interbank settlements in 2024 as part of the Orchid Blueprint.
Rajeshwar Rao, Deputy Governor of the Reserve Bank of India (RBI), shared an optimistic view on the success of CBDCs. Rao noted that they could enjoy greater success if they fulfilled unmet user needs and leveraged accessible existing technology and infrastructure.
He also highlighted the significance of data privacy, cybersecurity, and resilience as vital for CBDCs to be trusted like physical currency.
According to RAO, the RBI has already embarked on a CBDC pilot with about 2.75 million participants and is considering expanding its scope to include interbank money market transactions. Rao also suggested the possibility of implementing CBDCs on a multilateral basis in the future.