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The world may be going crazy over digital currencies, but tiny Singapore is swimming against the tide.

The central bank has decided against offering a paperless version of the city-state’s legal tender — at least for now. Not because an electronic version of cash may flop, but because it’ll most likely be a hit. That could have consequences for the island’s financial stability and conduct of monetary policy. Even if those risks are manageable with in-built safeguards, why rock the boat?

In a paper detailing the economic case for a central bank digital currency, the monetary authority concludes that “there is no pressing need for a retail CBDC in Singapore at this point in time.” However, it will keep adding to its capability to issue one, just in case the private sector in the future hooks consumers to a particular payment mode only to shortchange them by abusing its monopoly power.

This is a pragmatic approach. Startups might welcome an online medium of exchange that’s widely available to the public, and not tied to a large competitor. Then they won’t need to invest in proprietary e-money systems to compete. The problem is that Singapore’s triple-A-rated sovereign has historically accumulated fiscal surpluses and is not known to cheapen its exchange rate to gain an export advantage. That makes its currency an attractive store of wealth. In fact, a digital version may be perceived as superior since paper cash is costly to store.

In a low-interest-rate environment, a Singapore digital dollar could thus walk away with all-important bank deposits, which account for 92% of money supply and all of the online payments by households and firms. It would be a direct liability of the monetary authority and hence devoid of credit risk. The central bank could, however, tamp demand for its CBDC by putting limits on how much can be stored in a wallet. It could also restrict use only to residents and tourists, keeping it out of reach of global investors.

These checks may be crucial. The small, open Asian economy doesn’t set local interest rates. It guides financial conditions by tweaking the exchange rate of the Singapore dollar against a basket of trading partners’ currencies. Sacrificing monetary control to fit in with the zeitgeist of giving 5.5 million people a brand-new payment instrument is not a great tradeoff. A digital Singapore dollar can wait.

But that doesn’t mean that the financial center should stop gaining expertise. Even if the payment market stays sufficiently competitive to prevent consumers from being exploited, public-sector knowledge could come in handy should other emerging forms of electronic money — such as privately-issued Singapore dollar-denominated stablecoins — choose to utilize the technology. But why should Singapore bless private tokens when larger central banks such as the U.S. Federal Reserve are deeply suspicious of them?

Should the Fed decide to take the dollar digital, preempting the rise of China’s official e-CNY with its 140 million users (so far) may only be a secondary consideration. The immediate motivation could be to issue a safe and official alternative to increasingly popular stablecoins like Tether and USD Coin that peg their value 1:1 to the dollar. In its twice-yearly financial stability report this week, the Fed said that these digital tokens were “susceptible to runs” if people who invested in them decide to cash out simultaneously.

Without its own paperless currency, how will Singapore’s highly digital economy protect itself from global stablecoins? The Singapore dollar “could be vulnerable to being displaced by a widely used foreign digital currency,” the monetary authority notes, especially if it’s backed by a powerful e-commerce or social media network. The legal-tender nature of the home currency won’t save it from substitution because merchants aren’t bound to accept it as payment.

For example, it’ll be perfectly above board — if unlikely — for a local coffee shop to only take Diem, the soon-to-be-launched stablecoin backed by Meta Platforms Inc., formerly Facebook Inc. To take on foreign coins, it might make sense for Singapore to permit its homegrown banks to offer synthetic versions of the digital Singapore dollar. Rival Asian financial center Hong Kong, which entrusts paper money to commercial issuers, has floated a similar idea. The proposed retail e-HKD would technically be a private liability of financial institutions, yet could perform the role of tokenized public money. The Hong Kong Monetary Authority could let society benefit from online payments innovation without having to reinvent itself as a consumer-facing institution, a makeover that may be hard for any central bank to achieve.

Such a radical transformation may not even be desirable. If the digital Singapore dollar takes off as an alternative to bank deposits, lending can’t remain unaffected. As the monetary authority notes, in extreme circumstances, the introduction of a retail CBDC could lead to a greater role in the allocation of credit for the central bank. No central bank wishes to be pulled in that direction. While most other governments worry about whether anyone actually wants their paperless cash, Singapore’s problem is the opposite: A wildly successful digital currency may be too much of a good thing.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services.

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