SINGAPORE - The Monetary Authority of Singapore (MAS) is largely avoiding the issuance of digital currencies to the public, with the managing director of the central bank noting the risks associated with doing so.
Mr Ravi Menon, managing director of the MAS, said on Monday (Jan 15): "I'm not sure that's a good idea. I'm not ruling it out, but I can't see why you'd want to do that, because that completely disintermediates the banks."
Speaking to participants at a UBS event, Mr Menon added that during times of stress, the issuance of digital currencies can cause a bank run, as people rush to put everything into digital currencies at the central bank instead.
But the central bank is keen to explore the use of digital currencies as a means of improving the settlement process within the banking system. As part of MAS's blockchain experiment, it issued a digital currency that held no stored value.
Cryptocurrencies can be used as a form of fuel or incentive to power blockchain technology, but many applications of blockchain technology in itself do not depend on cryptocurrencies to function.
"The question is, does it have a life of its own, as a means of exchange and as a store of value? The irony is that cryptocurrency is not a currency," said Mr Menon, noting that cryptocurrency is neither legal tender, not reflects liability of any particular party.
"The use of cryptocurrency as an instrument of investment or shall I say, speculation - that is not technology. That is like Dutch tulips," he said, adding that the central bank remains concerned over this "speculative dimension".
"I do hope that when that fever has gone away, when the crash has happened, it will not undermine the much deeper and more meaningful technologies associated with digital currencies and blockchains."