Singapore Head Regulator: Digital Currencies 'Have a Role to Play' Despite Risks
Published on August 14, 2014 at 03:52 GMT
The Managing Director of the Monetary Authority of Singapore (MAS), Ravi Menon, has commented on bitcoin and digital currencies in an interview, saying they "have a role to play" in the future.
Speaking to industry publication CentralBanking.com, Menon answered questions about whether money should remain under the control of central banks, and why the MAS had decided to regulate "virtual currency intermediaries".
"It is hard to divine how technology and practices will evolve, 20 or 30 years from now. I would say virtual currencies have a role to play, but I doubt they will replace the fiat money that central banks issue – but I could be wrong."
Digital currencies' biggest advantages were cost-efficient and fast transfers, he said, but they lacked any central bank backing.
Wildly fluctuating prices also meant digital currencies did not meet the basic requirement of money as a store of value, he added.
"Nonetheless, digital currencies have a role to play, which is why we have not sought to ban them, or make it more difficult for them to operate. We still have Bitcoin ATMs here in Singapore. But we do see a clear and present danger in the form of money laundering and terrorism financing risk, because of the anonymity in virtual currency transactions."
Repeating the oft-heard statements from central banks and financial professionals about bitcoin's supposed role in money laundering and financing of terrorist activities, Menon said the anonymity of virtual currencies was a danger.
All intermediaries would have to follow know-your-customer (KYC) and associated regulations, he continued, saying digital currency companies would welcome this news as it would "weed out intermediaries that use virtual currencies for illicit purposes".
The risks would be addressed "in a targeted way" to allow innovation to still take place.
Singapore's fintech pedigree helps bitcoin
David Moskowitz, founder of Singapore-based bitcoin trading platform Coin Republic, told CoinDesk Singapore's status as a world financial hub meant it couldn't afford to ignore bitcoin and other financial technology innovation.
"MAS clearly sees the potential that cryptocurrencies hold for local economic growth. As the nature of finance changes with technological advances, the old models will become obsolete. As they did with the hedge fund, banking, and insurance markets, the government of Singapore has an excellent track record of foreseeing the next wave of opportunity for economic growth of her economy."
"I don't think they will sit idle while London, or Isle of Man, attempt to take leadership in the digital currency space. The public statement by MAS director Ravi Menon, and recent 'bitcoin experiment' by their sovereign wealth fund reaffirms this."
Singapore's government-owned investment company, Temasek Holdings, made headlines in the digital currency world in June when its chairman spoke about its experiments with bitcoin, including staff using Blockchain wallets and donating bitcoins to their preferred charities.
A variety of bitcoin startups
Singapore was marked early on as a potential haven for bitcoin and digital currency development. As a business and financial-services-oriented city-state, it currently has S$1.82tn ($1.45tn) of assets under management and is also a regional hub for IT startups.
It has more than eight bitcoin ATMs installed from four different manufacturers, including the native-grown Tembusu. In May, representatives from a number of digital currency companies launched the Association of Cryptocurrency Enterprises and Startups (ACCESS) to represent the industry in discussions with other businesses and policy-makers.
MAS had previously told Coin Republic that it "would not interfere" with bitcoin or attempt to regulate it, but then announced in March this year that it would take steps to regulate bitcoin exchanges and ATM companies to address risks associated with money laundering and terrorism financing.
Image via MAS