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Singapore Central Bank Says Cryptocurrencies Have “No Fundamental Value”

The Monetary Authority of Singapore, the city-state’s central bank, said it is focused on becoming Asia’s leading technology-driven financial hub, an ambition that encompasses blockchain and digital coins of the central bank. It does not include cryptocurrencies.

“Cryptocurrencies are not currencies and are unlikely to perform the functions of money because prices are subject to large speculative fluctuations and they have no fundamental value,” the bank said. central, known as MAS, in an email response to questions from Forkast.

The comments are among the clearest yet on Singapore’s distaste for the world of cryptocurrencies, which it is increasingly emphasizing in campaigns to persuade its citizens not to get into what it sees. as very risky investments. This distaste includes restrictions on advertising and marketing crypto in Singapore.

“MAS disapproves of cryptocurrencies as investments for retail investors,” he said in the statement.

The city-state punches well above its weight with a US$340 billion economy that generally ranks in World Bank surveys as one of the best places on the planet for ease of doing business. But not, it seems, for the cryptocurrency industry.

The unwelcome approach here is not just MAS. The Bank for International Settlements – which describes itself as a central bank for central banks – released a report over the weekend that swept crypto in all its guises, claiming that stablecoins are anything but stable (pointing, of course, to the collapse of Terra stablecoin) and that the whole crypto structure is not solid.

Singapore Crypto

What MAS thinks about digital currencies matters because it licenses so-called digital payment token service providers. Tokens, or DPTs, are defined as a cryptographically secure digital representation of value to be used as a medium of exchange, which encapsulates cryptocurrencies and stablecoins.

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The Singapore skyline. Image: Envato Elements

In a speech last Wednesday, Singapore’s Deputy Prime Minister Heng Swee Keat said the city-state had granted licenses and approvals in principle to 11 digital payment token service providers over the past two years. Dozens of other companies have applied for DPT licenses.

While MAS appears to grant licenses to conduct activities it disapproves of, locally vetted crypto exchange Coinhako said it gets the message.

“We are fully aware of the warnings the government is issuing and we can appreciate where they are coming from,” said Henryk Abucewicz Tan, Head of Services for High Net Worth Individuals and Institutions at Coinhako, in an interview with Forkast.

“Due to the lack of regulation so far, it is very difficult to control or really educate retail investors on the risks associated with the asset class. So we fully understand where the government is coming from,” he said.

“Of course, until I think some sort of regulation is in place, they can’t really stop retail from investing. But it turns out that because we (Coinhako) already have a big chunk of the retail market, the natural pivot is towards institutions,” he said, explaining Coinhako’s strategy in the Singapore environment.

More banks involved in the sector will encourage institutional adoption, Tan said. “And we know a number of names that are working on launching guard and spot services either by the end of this year or the first half of next year,” he added, declining to comment. name them.

Crypto.com and Revolut, two crypto exchanges with licenses in principle to operate in Singapore, declined to comment on MAS’ statement to Forkast.

Singapore Blockchain

Blockchain is where MAS comes back into the picture of wanting Singapore to be a world leader in so-called fintech, or financial technology.

“MAS is collaborating with industry to explore the potential of blockchain through experiments, providing grants, and encouraging talent development,” the authority said in the email, noting that this is happening. continues since 2016 with central banks and other financial institutions.

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The Monetary Authority of Singapore building. Image credit: sygna.io

MAS said his Ubin project explores the use of blockchain for payment and securities clearing and settlement. This project, he said, led JP Morgan, DBS Bank and the city’s sovereign wealth fund Temasek to create Partior, a blockchain-based multi-currency interbank clearing and settlement trading network.

Regarding central bank digital currencies (CBDCs), MAS said it is looking at instruments such as potential retail CBDCs and wholesale CBDCs, and clearly favors the latter.

MAS said there was no compelling rationale for a retail CBDC for economies such as Singapore which have “well-functioning payment systems and broad financial inclusion”, although the authority has said she was keeping an open mind on the matter.

In contrast, the monetary authority said it saw the potential for wholesale CBDCs to improve the efficiency and cost of cross-border payments and trade finance, pointing to its experiences with Project Ubin.

It is a partner in another project, named Dunbar, to develop a multi-CBDC platform, which will allow financial institutions to transact directly with each other in digital currencies. Partners include the Bank for International Settlements, Reserve Bank of Australia, Bank Negara Malaysia and the Reserve Bank of South Africa.

His most recent initiative is called Project Guardian and focuses on asset tokenization, a concept that aims to take illiquid assets – think real estate, art and the like – and split them into “tokens.” negotiable numbers. DBS Bank Ltd., JP Morgan and a Temasek firm are involved in this project to tokenize bonds and deposits, MAS said.

“Blockchain, tokenization, and crypto can be deployed together to enable high-value asset splitting and monetization of previously unmonetized assets,” MAS said. “This in turn will help unlock new economic value, strengthen financial inclusion and enable more transparent and efficient financial service delivery.”

Singapore supporters

Danny Chong, co-founder of Singapore-based Tranchess, which describes itself as a return-enhancing crypto asset tracking platform, sees the positive side of MAS’ message and what he called a forward-thinking approach .

“From a regulatory perspective, the focus is on innovation and growth while quickly weeding out bad behavior in this development phase to promote eventual mainstream adoption,” Chong said.

This approach will attract more financial professionals to crypto and improve credibility and governance, he said.

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Singapore Gardens by the Bay. Image: Envato Elements

Returning to the Coinhako exchange, the view is that tighter regulations and oversight are inevitable after the multi-billion dollar collapse of the stablecoin Terra, the loss of liquidity on crypto lending platforms like Celsius that resulted in customer account freezes and revelations that crypto venture fund Three Arrows Capital may be running out of money for margin calls.

The resulting fall in crypto markets and prices is a chance to pull back and prepare for the next market cycle, Coinhako’s Tan said. He said investors seem to want to make sure all liquidations and margin calls have been dealt with and are waiting for all rumors to die down, and until then any sort of relief rally will be temporary.

“And of course the magnitude of the selloffs is going to directly feed price action and risk appetite right after,” he said, adding that Coinhako is hiring to prepare for the next cycle.

“We also recently hired a team of 7-8 traffic and quant traders who are helping us capture more franchise value by increasing liquidity, reducing our spreads,” he said. “Basically a work in progress as the market recovers,” he added.

“So all of that will provide us with pretty ample ammunition for any strategic initiative,” Tan said. “And we’re not too worried.”

Yusho Liu, CEO and co-founder of Coinhako, addressed a similar theme in an email response to questions from Forkast.

“Singapore’s regulations may seem unfavorable to key players currently, but we believe that in the long term, this will put us in a stronger position as trust between crypto players, institutions and investors is established. gradually.”

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