The managing director at Singapore’s central bank has given a speech talking about the potential the blockchain can deliver with international payments.
In a speech, given yesterday, Ravi Menon, the managing director of the Monetary Authority of Singapore (MAS), said that the distributed ledger is ‘suited for applications’ where it’s important to known ownership history, but no trusted central party exists or relying on one is costly and inefficient. As examples, he cites the supply chain management and trade finance industries.
According to Menon, however, the ‘strongest use case’ for cryptocurrency tokens is to aid cross-border settlements, adding:
This is the challenge that Singapore’s Project Ubin has set itself to solve: to use blockchain technology to enable entities across jurisdictions to make payments to one another without intermediaries; with greater speed and efficiency; and at lower risk and cost.
He added that after two successful proofs-of-concept, MAS has joined with the Bank of Canada to test and develop a cross-border solution using cryptocurrency tokens issued by the two central banks.
During his speech Menon also commented on the fact that the central bank has been watching the digital currency industry with some interest. When questioning whether crypto tokens can ever be considered as money, he stated that ‘crypto tokens cannot be a store of value if their prices fluctuate so much.’ However, he added that that doesn’t mean they can’t become money in the future.
Notably, in February, it was reported that Singapore’s deputy prime minister had said that there is ‘no strong case to ban cryptocurrency trading’ as they don’t pose a risk to the country’s financial system. At the time, Deputy Prime Minister Tharman Shanmugaratnam expressed the view that ‘cryptocurrencies are an experiment,’ with the cryptocurrency market growing internationally, adding:
Its use in making payments is small, and trading volumes of cryptocurrencies in Singapore are also not high – they are much smaller than in countries like the U.S., Japan, and South Korea. Further, connections between cryptocurrency trading and Singapore’s financial system are also not significant at present. Singapore’s banking system does not have any significant exposure to global and local entities dealing in cryptocurrencies. We hence do not have broader, systemic risk concerns with regard to cryptocurrencies.
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