The litmus test of whether cryptocurrencies can become money will be public trust and acceptance, according to Ravi Menon, Managing Director, Monetary Authority of Singapore (MAS).

Speaking at Money20/20, Menon shared the current state of the central bank’s thinking and its evolving regulatory approach on cryptocurrencies. Assessing whether cryptocurrencies, in their current form, fit the definition of money, he made the following observations:

“With the possible exception of the dark web, crypto tokens are not widely accepted as a medium of exchange in any market, let alone across any variety of transactions

• Payment transactions in crypto tokens are often slower and more expensive than conventional electronic transfers of funds.

Crypto tokens cannot be a store of value if their prices fluctuate so much.

Crypto tokens also fail as a unit of account.”

However, he said that as the technology is evolving, there could be such crypto tokens that would function as money.

“With technology, we can never say never. A second generation of crypto tokens is emerging, to address some of the current challenges related to network congestion, transaction time, energy costs, money laundering risks, and importantly, price stability. The litmus test will be public trust and acceptance,” Menon said.

He further said that while the MAS has chosen not to regulate cryptocurrencies directly, it is focusing on related activities, evaluating the different kinds of risks these activities pose, and considering the appropriate regulatory responses. At the same time, the regulator wants to ensure that its measures 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,” he said.