Ravi Menon: Crypto tokens - the good, the bad, and the ugly Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at Money20/20, Singapore, 15 March 2018. * * * Ladies and gentlemen, good afternoon. And to all our foreign guests, welcome to Singapore. This is a conference named after Money. Money has been with us for at least 5000 years. And over the last 300 years or so, we have come to accept Money as being issued by central banks whose mission in life is to safeguard its value. Now, along comes a new phenomenon – crypto money or currency or asset. The past year has seen explosive growth in the trading and use of these crypto assets. We have also seen a rollercoaster ride in their prices. Bitcoin – the most well-known of the crypto currencies or assets – hit a high of nearly $ 000 in December last year. And then lost two-thirds of its value in just over a month. MAS has been watching the crypto space with great interest. Our views are still evolving but let me share with you the current state of our thinking and our evolving regulatory approach. I will use the more generic term “crypto tokens” rather than “crypto currencies” or “crypto assets”. Crypto tokens began life as the medium of exchange within the blockchain ecosystem. But the token has now assumed a life of its own, outside the blockchain. Are crypto tokens money?
Investors in schemes involving crypto tokens may also be exposed to a heightened risk of fraud. These schemes are often conducted online by operators whose authenticity and credibility are difficult to verify. Managing crypto risks 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? MAS has to-date chosen not to regulate crypto tokens directly. But we are: 3/6  BIS central bankers' speeches  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. The key risks MAS is monitoring in the crypto world are in the areas of financial stability, money laundering, investor protection, and market functioning. Financial stability MAS and other regulators are studying the nexus between the crypto world and the financial system to assess how risks to financial stability may be transmitted: market risk from the direct exposure of financial institutions to crypto tokens; credit risk through unsecured lending to crypto token businesses; and leverage when borrowers pledge crypto tokens as collateral to borrow and buy more crypto tokens. MAS assesses that the nature and scale of crypto token activities in Singapore do not currently pose a significant risk to financial stability. But this situation could change, and so we are closely watching this space.