By Krystal Chia
(Bloomberg) —Cryptocurrencies have a place in Singapore’s financial sector if these digital assets are regulated, according to the chairman of the nation’s central bank.
“There may be a role for crypto in future finance that extends beyond pure speculation and illicit finance,” Tharman Shanmugaratnam, the chairman of the Monetary Authority of Singapore, said Wednesday at the Asia Financial Markets Forum. Stablecoins, for example, can have a role in traditional payment systems, though these digital assets need to be regulated for illicit finance activities including anti-money laundering, he said.
The central bank is keeping an “open mind” on cryptocurrencies because the regulator wants technologies and innovation to develop, said Tharman, one of Singapore’s most influential politicians who has held roles in organisations such as the International Monetary Fund.
Tharman’s comments come as Singapore builds its status as a crypto-technology hub and lays the framework for activities such as trading, listing, tokenisation and custody. In contrast, countries like China have taken a more hardline approach. The city recently granted licenses to the brokerage arm of DBS Bank Ltd. and an Australian cryptocurrency exchange, even as the regulator has been warning the public about the risks of trading digital assets such as Bitcoin.
“I think the future will be one where regulated stablecoins will have a useful role in a traditional payment system that innovates and becomes more inter-operable across borders for cheap, fast and instant payments,” he said during his dialogue with Bloomberg News’ Haslinda Amin. Stablecoins are a crypto subset often pegged to fiat currencies such as the dollar.
Rather than using the word crypto, Tharman said he prefers to approach the topic through a fintech lens, whereby such technologies have the potential to help large underserved markets and segments of the population that struggle to get unsecured financing. In addition, fintech has given a “useful jolt” to the system with banks responding to the challenge, thereby lowering costs and improving reliability of financial services, he said.
‘Wise and Foolish’
Still, Tharman doesn’t see cryptocurrencies replacing money as legal tender given their volatile and speculative nature.
“If you have an instrument that is volatile in pricing, it’s never going to become money,” he said. “It’s going to be a speculative asset, for both the wise and foolish.”
El Salvador became the first country to adopt Bitcoin as legal tender in September, drawing attention to whether the move would entice people to transact with Bitcoin and bring any benefits to the country. The experiment had a rocky start however.
© 2021 Bloomberg L.P.