Menon stated that cryptocurrencies like Bitcoin [BTC] should not be called currencies but should rather be called ‘digital tokens’. He said this as a follow up to the lack of clarity and speculation that is prevalent in the cryptocurrency market right now.
The MAS official went on to say that calling the tokens a currency is wrong because it does not have the qualities of mainstream fiat currency yet. According to Menon, fiat currency’s factors like stable value, accreditation by a centralized authority all make it more valuable than cryptocurrencies. There is a trust factor that is deeply ingrained in fiat currency that is just not present in the digital asset market, he said.
He then went on to differentiate between the two types of digital tokens, that is utility tokens and securities token. Menon stated:
“Utility tokens are imperative to the functioning of the blockchain are used to buy services, namely cloud services. The main difference factor is that utility tokens do not come under the regulatory ambit. Security tokens are issued by companies that raise capital and to provide funding.”
Ravi Menon made it clear that dealing with security tokens is much more tricky because of the regulatory crackdowns. He advised ICO players to be careful while crossing the ‘utility token-security token’ boundary because it will lead to the ICOs suffering the full force of authorities like the Securities and Exchange Commission [SEC].
Ravi Menon was also in the news earlier when he had said that the financial regulator is ready to help cryptocurrency firms which are finding it difficult to set up local bank accounts. Menon said:
“What we are trying to do is to bring the banks and cryptocurrency fintech startups together to see if there is some understanding they can reach.”
To create more jobs and diversify the financial sector, Singapore had opened its economy for the development of the fintech sector. Nevertheless, to be cautious of the new players in the market and to reduce the chances of fraud, the financial regulator had imposed a lot of restrictions, significantly hindering operations of cryptocurrency firms in the country.