Interview: Singapore’s Central Bank Chief on Crypto, AI and Battling Inflation

The Monetary Authority of Singapore (MAS), as the central bank of Singapore, plays a significant role in influencing the global economy due to its policy decisions. Despite being one of the wealthiest nations per capita, Singapore’s economy heavily relies on international trade, which constitutes more than three times its GDP, thus making the country vulnerable to geopolitical tensions and global economic challenges [para. 1][para. 2].

In recent times, countries like the U.S. and the EU have erected trade barriers to shield their industries, adding to regional conflicts and global economic disruptions exacerbated by the COVID-19 pandemic. Many central banks, including MAS, have been striving to control inflation [para. 3]. In response, MAS chose to maintain its current monetary policy in October, sustaining the policy band of the Singapore dollar nominal effective exchange rate (S$NEER), supported by a strengthening growth momentum and a forecasted decline in core inflation [para. 4]. The central bank has also been spearheading fintech regulation to harness new technologies while mitigating associated risks [para. 5].

Under the leadership of Managing Director Chia Der Jiun, MAS has confronted post-pandemic global price shocks. Around 2021, global inflation surged due to increased demand and supply chain disruptions. In response, MAS began tightening its monetary policy early, with a series of adjustments to the S$NEER in 2021 and 2022 to counter imported inflation [para. 6][para. 9]. This monetary approach has been effective in restraining aggregate demand and price pressures, with core inflation dropping to 2.1% by October 2023. Maintaining the current monetary stance is seen as appropriate to further ease inflation [para. 8][para. 10].

Domestically, a stronger-than-expected labor market could delay inflation normalization, while global geopolitical tensions and economic fluctuations also present risks [para. 11]. Furthermore, Singapore is progressing with its wholesale Central Bank Digital Currency (CBDC) discussions but finds no immediate need for a retail Singapore dollar CBDC, citing efficient electronic payment systems and collaboration plans with China for cross-border digital currency initiatives [para. 13][para. 14].

Looking ahead, MAS considers wholesale CBDCs as a means to enhance cross-border payments and securities settlements by developing collaborative infrastructure and policy frameworks [para. 18]. As for cryptocurrency regulation, MAS is focused on issuing licenses under the Payment Services Act 2019, ensuring criteria like effective compliance are met. Over 200 Major Payment Institution licenses have been granted, while the regulatory framework continues to evolve to manage emerging risks [para. 20][para. 22].

The MAS is continuously refining its regulatory approach to address evolving risks and driving innovation in digital assets, evident in their consumer protection measures, such as stablecoin regulations. These measures aim to ensure a high degree of value stability in digital tokens. They also play a proactive role globally through involvement in setting regulatory standards [para. 24][para. 29].

Finally, MAS significantly fosters fintech developments, growing from less than 50 firms to over 1,400 since 2015, and hosts the Singapore FinTech Festival, drawing participants worldwide. Their focus is on harnessing innovation to solve real-world problems, like enhancing cross-border payments and creating data-driven solutions for green financing. Despite challenges regarding data availability for ESG needs and managing emerging technologies like AI, MAS actively collaborates with the industry to develop solutions that promote trust and governance within the financial sector [para. 32][para. 40][para. 42].