News Risk Management20 Dec 2017

Singapore:Regulator cautions against investments in cryptocurrencies

20 Dec 2017

The Monetary Authority of Singapore has advised the public to act with "extreme caution" and understand the significant risks they take on if they choose to invest in cryptocurrencies.

The regulator expressed in a statement on Tuesday that it is concerned members of the public may be attracted to invest in cryptocurrencies, such as Bitcoin, due to the recent escalation in their prices. It reminded the public that cryptocurrencies are not legal tender and are neither issued by any government nor backed by any asset or issuer.

MAS said it considers the recent surge in the prices of cryptocurrencies to be driven by speculation, with a high risk of a sharp reduction in prices. 

"Investors in cryptocurrencies should be aware that they run the risk of losing all their capital," it warned. 

Currently, there is is no regulatory safeguard for investments in cryptocurrencies in Singapore. MAS pointed out that it does not regulate them--similar to regulators in most jurisdictions--and its regulations do not extend to the safety and soundness of cryptocurrency intermediaries or the proper processing of cryptocurrency transactions. 

As most operators of platforms on which cryptocurrencies are traded do not have a presence in Singapore, it would be difficult to verify their authenticity or credibility. There is greater risk of fraud when investors deal with entities whose backgrounds and operations cannot be easily verified. 

Cryptocurrency transactions are generally anonymous, which makes them vulnerable to being misused for unlawful activities. If an intermediary is found to have used cryptocurrencies illegally, its operations could be shut down by law enforcement agencies. There is also a risk of loss should the intermediary be hacked, as it may not have sufficiently robust security features. 

"Members of the public who lose money from investing in cryptocurrencies will not be able to rely on any protection afforded under legislation administered by MAS," warned the regulator. "Investors should carefully assess whether an investment in cryptocurrencies is suitable for their investment objectives and risk appetite."

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