The Good, The Bad & The Ugly: Monetary Authority of Singapore Critiques Cryptocurrency Market

In a speech delivered at the Money20/20 Asia conference in Singapore, Ravi Menon, MD of the Monetary Authority of Singapore (MAS) delivered a speech assessing the state of cryptocurrencies and initial coin offerings (ICOs). Entitled, “Crypto Tokens: The Good, The Bad, and The Ugly,” Menon leveraged the popular theme of the legendary Spaghetti Western that starred a young Clint Eastwood.

Menon told the audience that MAS has been watching the cryptocurrency space with great interest. Using the “more generic term” of crypto-tokens, Menon started by echoing some of the thoughts of his compatriot at the Bank of England, Mark Carney, who recently bashed cryptocurrencies as a viable replacement for government issued money.

But does this mean that crypto tokens may never become Money?

Menon believes that with technology, you can never say never.

“A second generation of crypto tokens is emerging, to address some of the current challenges related to network congestion, transaction time, energy costs, money laundering risks, and importantly, price stability. Some of the best minds in the field are applying their creative energies to make crypto tokens mainstream. Not all developers and programmers in the crypto world are anti-establishment anarchists. Many may have been 10 years ago, but a growing number are married and have kids now! They know the value of stability. The litmus test will be public trust and acceptance. Basically, the history of privately issued money has not been an inspiring one. Will people put their faith in Money that is not backed by a trusted public institution like a central bank dedicated to protecting its value? Perhaps – if an algorithm can mimic the reaction function of a central bank and preserve the value of the crypto token better than central banks can do with respect to fiat currencies.”

Menon says the good is the underlying blockchain technology that will be used for much more than financial services. Distributed ledger technology or DLT can accomplish things with greater speed and efficiency and
at lower risk and cost.

And for the bad, the anonymity of cryptocurrency makes it a favorite of more nefarious characters. Menon says a significant portion of Bitcoin transactions are for illicit purposes. Crypto tokens have also facilitated ransomware – a popular cybercrime. Criminal acts must be dealt with.

And what about the ugly?

Menon says speculative fever receives this ignominious accolade. Speculative bubbles never, ever, end very well.

“The challenge for central banks and regulators is this: how can we harness the potentially transformative benefits of blockchain technology and crypto tokens while containing some of their risks?” asked Menon.

MAS is currently taking the following approach:

• focusing on the activities associated with crypto tokens,
• evaluating the different kinds of risks these activities pose, and
• considering the appropriate regulatory responses,
• all the while, seeking to ensure that we do not stifle innovation.

It is a balancing act of ensuring financial stability, dealing with illicit acts, investor protection while enabling innovation.

“We must work together – regulators and the crypto industry – to make sure that bad money does not take hold. And that a new generation of crypto tokens emerges, that harnesses the potential of blockchain technology for social good while mitigating the risks today’s tokens pose. This is a future worth securing and I hope that some of the talents gathered in this hall will help to make it happen.”