Regulatory changes impacting some of the Chinese digital bank applicants are unlikely to have an impact on the granting of the new licences in Singapore.
MAS (Monetary Authority of Singapore) is still on track to award digital bank licences by the end of December, according to managing director Ravi Menon.
In an interview with Bloomberg, Menon said the regulatory changes in China impacting some of the digital bank applicants are unlikely to have an impact on the granting of the new licences, as any potential licensees from China will still have to meet Singapore regulatory requirements.
Asked what the Chinese applicants bring to the table, Menon pointed to their technological capabilities and their ability to harness data to draw insights and provide customised, just-in-time services.
Menon also spoke of new developments in digital currencies, highlighting that CBDCs in particular can mostly help to solve problems associated with cross-border transactions.
“Today in Singapore I can pay you and you can pay me with three clicks on our mobile phone. We don’t need a CBDC,” he said.
“Our problem is paying our friends in America and Europe or China or India, because that goes through the old traditional correspondent banking network, which is usually cumbersome, sometimes not very secure, and [costly]. That’s what we need to change.”
“As I’ve said before, it is a failing of banks and central banks that we’ve not solved this problem – something that is quite basic.”
Menon does not expect CBDCs to replace the US dollar, saying that it is intangible confidence and trust that make a currency internationally acceptable. This comes from the governance, institutional mechanisms, currency convertibility, and free flow of capital, among others – attributes that the US dollar enjoys.
Addressing the Covid-19 pandemic, Menon said the worst of the crisis is most likely behind us, and that it’s time to start gently tapering off support measures.
“You’ve got to start unwinding so that you avoid that cliff effect later on when everything is pulled back at the same time. You’ve got to start doing this gradually as the recovery progresses.”
Menon warns that unwinding support too quickly could undermine the recovery, however not pulling back fast enough may result in problems for the future, such as high debt levels, or potentially a double dip recession next year.
“Debt sustainability is going to be a challenge for many countries.”
Singapore is holding its annual fintech festival from 7-11 December 2020. Find out more here.