ravi menon : money at a crossroads - public or private digital money? summary of panel remarks ( virtual ) by mr ravi menon, managing director of the monetary authority of singapore, at the imf seminar on money at a crossroads, 18 april 2022. * * * summary of remarks by ravi menon a crypto asset or token is about digitally representing anything we regard as having value, putting encryption around it on a distributed ledger, where the ownership of the asset can be ascertained and verified, and it can be transferred securely. in singapore and in mas, we are excited about the potential to build a crypto or tokenised economy. cryptocurrencies, about which there is so much excitement, is just one sliver of the crypto ecosystem or economy comprising a variety of tokenised assets. cryptocurrencies are crypto assets which perform a payments function and try to mimic money. private cryptocurrency is unlikely to perform the functions of money because its value is unstable and it is not backed by the central bank or the government. stablecoins are pegged to a fiat currency and therefore derives stability, but it is not clear that all stablecoins, which purport to have a backing, are indeed backed adequately. without such backing, it is hard to imagine how they will fulfil the function of money. stablecoins will become a more prominent feature as long as their backing is strong. they could potentially challenge the currencies of some smaller emerging market economies. if they are used widely, they could lead to currency substitution and the potential loss of money sovereignty in these countries. with respect to central bank digital currencies ( cbdcs ), mas makes a careful distinction between wholesale cbdcs and retail cbdcs. both are digital currencies issued by the central bank. for wholesale cbdcs, mas sees a variety of potential use cases. they can be used in the interbank system on a decentralised ledger to facilitate cross - border payments and transactions. mas has conducted successful experiments with the industry and other central banks on wholesale cbdcs. this is an interesting development to watch. most of the impactful use cases are going to be in wholesale cbdcs for, for example, cross - border payments, and cross - border trade finance. for retail cbdcs, mas is keeping an open mind. we want to make sure we have the technology, governance, and policy structures to

market conduct measures focus on upholding principles of fairness and transparency, for instance, through requirements on disclosure to investors and a fair - dealing sales process. the second leg of the tripartite approach is to put the primary responsibility for sound risk management and oversight of each institution on the board and senior management, which must set the right tone and culture. the third leg is to promote greater awareness among investors of their financial needs, encourage financial planning and promote deeper understanding of the risks and returns of different products, through educational programmes such as moneysense. 4 the fourth pointer from the current crisis is the importance of preventing regulatory arbitrage, and ensuring a level playing field. with regards to islamic finance, in particular, mas seeks to ensure a level playing field between the conventional and islamic financial players. where the economic substance and risks are similar, the same regulatory treatment is accorded, regardless of whether the product is a “ conventional ” or “ islamic ” product. for example, singapore - based banks treat murabaha - based 5 asset financing as a credit risk exposure to the customer for the purpose of maintaining regulatory capital. as islamic finance grows, our regulatory framework must continue to evolve to maintain regulatory consistency in managing the underlying substance of the risks. international collaboration the fifth and very crucial point that emerges from the current crisis is the importance of international collaboration. as islamic finance grows, cross border transactions will multiply. we must therefore take an international perspective in preventing and resolving problems right at the outset. allow me to suggest three areas where regulators can work closely. the first area is that legal, regulatory and supervisory frameworks that are developed should be based on internationally recognised principles and standards. the work done by international standard - setting bodies such as the ifsb, idb, aaoifi and iifm 6 is instructive in this regard. for example, “ the ten year framework and strategies ” co - issued by the ifsb and idb is a thoughtful blueprint. aaoifi has also produced standards in areas such as accounting, auditing, ethics, shariah compliance and governance. today, the applications of shariah precepts differ somewhat in certain areas. it will eventually be desirable to have some standardisation to enhance consistency and to remove one source of regulatory risk. however, our goal should be to achieve a gradual harmonisation of standards and approaches to regulation, rather than immediate convergence. even in conventional finance, regulatory approaches and standards differ across different jurisdictions.