He said at a seminar on Monday that the authority is taking a four-pronged approach to building the digital asset ecosystem.
The first is exploring the potential of distributed ledger technology in promising use cases, the second is supporting the tokenization of financial and real economy assets, the third is enabling digital currency connectivity, and the fourth is anchoring players with strong value propositions and risk management.
Menon elaborated on Singapore's strategy to develop the ecosystem as well as its regulatory approach to managing the risks of digital assets, so as to tackle the confusion of some observers about the seemed mixed signal sent by MAS about crypto and digital assets.
On the one hand, MAS is promoting Singapore as a FinTech hub, partnering industry to explore distributed ledger technology (DLT), and supporting innovation in digital asset use cases. It has said it wants to attract leading crypto players to Singapore. On the other hand, MAS has a stringent and lengthy licensing process for those who want to carry out crypto-related services, and it has also been issuing strong warnings against retail investments in cryptocurrencies and has been taking increasingly stronger measures to restrict retail access to cryptocurrencies.
"Public and media attention has tended to focus on cryptocurrencies," Menon said. "But cryptocurrencies are just one part of the entire digital asset ecosystem."
He said that many items with value, including financial assets like cash and bonds, real assets like artwork and property, and even intangible items like carbon credits and computing resources, can potentially be tokenized and become digital assets. When deployed on distributed ledgers, digital assets are referred to as crypto assets.
The innovative combination of tokenization and distributed ledgers offers transformative economic potential, and MAS sees strong potential in this digital asset ecosystem and is actively promoting it, he added.
But cryptocurrencies, the digital assets issued directly by the distributed ledger protocol, are actively traded and heavily speculated upon, with prices that have nothing to do with any underlying economic value related to their use on the distributed ledger.
MAS regards cryptocurrencies as unsuitable for use as money and as highly hazardous for retail investors, and it strongly discourages and seeks to restrict the speculation in cryptocurrencies, Menon said.
The managing director said that MAS wants to make Singapore one of the most conducive and facilitative jurisdictions for digital assets. At the same time, it wants Singapore to be one of the most comprehensive in managing the risks of digital assets, and among the strictest in areas like discouraging retail investments in cryptocurrencies.
But Menon did not say that MAS will ban cryptocurrencies trading activities.
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