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Bitcoin not a currency, investors risk losing all: MAS

MAS reminds the public that there is no regulatory safeguard for investments in cryptocurrencies

Cryptocurrency transactions are generally anonymous, which make them vulnerable to being misused for unlawful activities, the MAS said.


AS bitcoin continues its gravity-defying bounce, the Monetary Authority of Singapore (MAS) has yet again joined other regulators to warn that the cryptocurrency is not a currency.

"Bitcoin has no natural intrinsic value. Can you buy a house with it?" posed Sopnendu Mohanty, MAS' fintech chief, in an interview with British daily The Telegraph.

"Can you use it for daily interactions? It may be valued at US$18,000 right now but what I want to know is how you convert it into fiat currency and realise that value. The risk comes at the moment of conversion," he said.

In an advisory issued on Tuesday, the central bank said the public should act with extreme caution and understand the significant risks they take if they choose to invest in cryptocurrencies.

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"MAS is concerned that members of the public may be attracted to invest in cryptocurrencies, such as Bitcoin, due to the recent escalation in their prices," it said.

MAS reminds the public that cryptocurrencies are not legal tender. "They are not issued by any government and are not backed by any asset or issuer."

Indicating that the recent surge in the prices of cryptocurrencies was driven by speculation, the MAS cautioned: "The risk of a sharp reduction in prices is high. Investors in cryptocurrencies should be aware that they run the risk of losing all their capital."

Worries about a bitcoin bubble has been growing as its price has risen some 1,700 per cent since the start of 2017. It was as high as US$19,666 on Sunday.

Anxiety is mounting as mainstream exchanges launch bitcoin contracts, lending them an air of legitimacy.

CME Group Inc, the world's largest derivatives exchange operator, became on Sunday the second exchange to launch bitcoin futures trading, seeking to capitalise on the mania for the booming digital currency.

CME's move followed that of Chicago-based derivatives exchange Cboe Global Markets, which introduced bitcoin futures on Dec 10.

But exchanges can also be dicey.

South Korea's spy agency said North Korean hackers were behind attacks on cryptocurrency exchanges this year, stealing some 7.6 billion won (S$9.43 million) worth of cryptocurrencies.

A South Korean cryptocurrency exchange - Youbit - is to file for bankruptcy after it was hacked for the second time this year.

There is no regulatory safeguard for investments in cryptocurrencies, said MAS.

"As in most jurisdictions, MAS does not regulate cryptocurrencies. Nor do MAS regulations extend to the safety and soundness of cryptocurrency intermediaries or the proper processing of cryptocurrency transactions," it said.

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, MAS added.

"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 make them vulnerable to being misused for unlawful activities, according to MAS.

"If a cryptocurrency intermediary is found to have used cryptocurrencies illegally, its operations could be shut down by law enforcement agencies," it said. "There is also a risk of loss should the cryptocurrency intermediary be hacked, as it may not have sufficiently robust security features."

The central bank said those who lose money from investing in cryptocurrencies would not be able to rely on any protection afforded under MAS-administered legislation.

On Nov 14, MAS published its list of guidelines for ICOs or initial coin offerings, outlining case studies for which digital tokens will be considered securities. (see amendment) 

Despite its warnings against investing in bitcoin, MAS has not discouraged fintech innovations. On the contrary, it's multi-phase Project Ubin in partnership with banks has been exploring blockchain technology and its applications. Last month it released a report showing how blockchain technology can improve the payment systems that now enable banks around the world to transfer trillions of dollars a day to each other and help them manage their financial liquidity.

The MAS has also teamed up with the Hong Kong Monetary Authority to roll-out in early 2019 a global trade connectivity network. Using blockchain technology, the trade finance platform aims to bring about the seamless transfer of digital documents and data across borders and reduce fraud and accounting errors.

Amendment: An earlier version of this article stated that​ MAS published its list of guidelines for initial coin offerings last week. MAS has since clarified that it was published on Nov 14. The article above has been revised to reflect this. 

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