Private cryptocurrencies that failed the fundamental tests of financial services will eventually exit the monetary scene, according to Singapore’s central bank chief.
That will leave a future monetary system made up of three key components: central bank digital currencies, tokenized bank liabilities and “well-regulated” stablecoins, Monetary Authority of Singapore’s Managing Director Ravi Menon said in Hong Kong on Tuesday.
Private digital coins “have miserably failed the test of money because they can’t keep value,” Menon said at a panel discussion on the Future of Monetary System as part of the Hong Kong Monetary Authority-Bank for International Settlements event. “Nobody keeps their life savings in these things. People buy and sell these things to make a quick buck.”
“Private cryptocurrencies which are native digital tokens don’t meet that test, so I think that they will eventually leave the scene,” he said.
In contrast, regulators are moving toward a system of stablecoins that are fully backed by high-quality government securities or cash, allowing them to be used like narrow money, Menon said. “The beauty is it’s in token form and it can be used for variety of innovative applications.”
Meanwhile, a top Indian central banker said he sees central bank digital currencies enjoying greater success if it meets unmet user needs, and is implemented using accessible existing technology and infrastructure.
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“Data privacy is a concern. Cybersecurity and resilience are also very very critical issues that we will have to ensure so CBDC can be trusted as much as physical currency,” M. Rajeshwar Rao, a deputy governor at the Reserve Bank of India, said at the same panel. The regulator is also working on the facilitation of offline transactions.
The RBI is among a handful of central banks that has launched a CBDC on a pilot basis, counting about 2.75 million participants so far. Rao sees the scope for the central bank digital currency to be expanded further to include interbank money market transactions.
So far CBDCs are on a bilateral basis, and going forward there’s need for greater thought on how to implement it on a multilateral basis, Rao said.
