Singapore still wants to be a hub for digital assets, but not one for speculating on cryptocurrencies, said Ravi Menon, managing director of central bank the Monetary of Singapore.
“If a crypto hub is about experimenting with programmable money, applying digital assets for use cases or tokenizing financial assets to increase efficiency and reduce risk in financial transactions, yes, we want to be a crypto hub,” said Menon in his opening address at the Singapore Fintech Festival 2022 on Thursday.
Tokenizing a financial asset involves converting its ownership rights into digital tokens.
DBS Bank is testing out Singapore’s first digital money live pilot for government vouchers, enabling merchants to program and self-execute the distribution and usage.
“But if it is about trading and speculating in cryptocurrencies, that is not the kind of crypto hub we want to be,” said Menon.
Singapore has ambitions to become a global crypto hub, but has been cracking down on the industry after many retail investors lost their life savings to crypto trading. The city-state has repeatedly warned that cryptocurrency trading is “highly risky and not suitable for the general public” due to its volatile and speculative nature. It even banned crypto advertising in public areas and on social media in January 2021 and proposed new measures to protect retail investors recently following the $60 billion collapse of Terra’s Luna.
Still, Singapore has openly shown its approval for blockchain technology and has embarked on various projects. Those include Project Ubin, which successfully completed its experiment using blockchain for the clearing and settlement of payments and securities.
Another is Project Guardian, which recently completed its first industry pilot that involved DBS Bank, JPMorgan and SBI Digital Assets Holdings conducting transactions in tokenized foreign exchange and government bonds.
“Project Guardian’s first pilot has demonstrated the potential for reducing risks in executing trades,” said Menon.
“These projects strive to increase efficiency in the product value chains, lower efficient issuance and servicing costs and improve transparency and accessibility. We believe Project Guardian can help pave the way for the next evolution of financial markets in Singapore,” said Menon.
MAS will be following up with two new industry pilots — one with Standard Chartered Bank leading an initiative to explore the issuance of tokens linked to trade finance assets and the other with HSBC and UOB working alongside Marketnode to enable native digital issuance of wealth management products.
In his speech, Menon also announced that the MAS will be launching Project Ubin+, a global initiative on the cross-border exchange and settlement of foreign currency transactions using wholesale central bank digital currencies.
Project Ubin was first started in 2016 and is the launch pad for the development of Partior, a blockchain-based payments clearing and settlement network by DBS Bank, JPMorgan and Temasek.