The credibility of money is underpinned by this two-tier monetary structure where commercial banks create money and central banks preserve its value. Three new developments have emerged over the past decade that fundamentally challenge this 1/8  BIS central bankers' speeches  two-tier monetary structure: cryptocurrencies; stablecoins; currencies. and central bank digital  Cryptocurrencies A cryptocurrency is a digital token issued and managed within a decentralised protocol, such as a distributed ledger or blockchain. It represents an asset in digital form that can be transferred or traded on the protocol. The word “crypto” comes from the Greek word kryptos – which means “secret”. Indeed, the anonymity of crypto tokens has unfortunately made them well suited for facilitating illicit transactions, including money laundering. Cryptocurrencies have also helped to fuel ransomware – one of the fastest growing crimes in cyberspace. Are cryptocurrencies money? So far, the answer must be no. Cryptocurrencies have performed poorly as a medium of exchange, a store of value, or a unit of account. MAS prefers to call them by their more accurate technical name: crypto tokens. We define tokens that are used for payments purposes as digital payment tokens, and entities which provide services related to such tokens in Singapore are subject to licensing and supervision by MAS, primarily for money laundering and terrorism financing risks. MAS frowns on cryptocurrencies or tokens as an investment asset for retail investors. The prices of crypto tokens are not anchored on any economic fundamentals and are subject to sharp speculative swings.

For several emerging economies, such conditions are reflective of the growing phenomenon of the urban poor, with significant implications for social stability and balanced growth. To address this, inclusive growth strategies have gained prominence in recent years among the policymakers in the region. This needs to be further reinforced by strategies targeted at preparing individuals at an early stage to be well equipped to adjust to the new economic, financial and social realities that confront them. This is where financial education has a fundamental role. A key concern in this environment is to strengthen the capability of financial consumers, in particular household and small businesses, so as to avoid being marginalised by market forces and by the disproportionate impact of the changing financial and social landscape. Related to this is the need to reinforce socially responsible finance, and to address the new and growing risks of financial exclusion. Sophisticated risk-profiling methods employed by financial institutions can make it more difficult for deserving individuals and businesses to  BIS central bankers’ speeches  1  qualify for financial services. Among those that qualify, aggressive marketing practices and more complex financial products can also lead to poor financial decisions at a time when economic and financial reforms are also shifting greater responsibility to individuals to plan and provide for retirement and unexpected developments. Marketing practices that target select groups of consumers often further deprive the broader segments of society from new products that can better meet their financial needs.