The meteoric gains in value by bitcoin and other cryptocurrencies have “concerned” Singapore’s central bank into issuing a public caution against cryptocurrency investments.
In a notice today, the Monetary Authority of Singapore (MAS) urged the general public to “act with extreme caution and understand the significant risks” involved in investing in cryptocurrencies.
An excerpt from the notice read:
“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.”
Cryptocurrencies like bitcoin aren’t recognized as legal tender, the central bank and financial regulator stressed, adding that it does not regulate cryptocurrencies.
“MAS considers the recent surge in prices of cryptocurrencies to be driven by speculation,” the authority added, joining the chorus of similar remarks from central banks around the world. “The risk of a sharp reduction in prices is high,” the central bank added in making a reference to volatility. “Investors in cryptocurrencies should be aware that they run the risk of losing all their capital.”
A major FinTech center, Singapore has, through its central bank, issued digitized Singaporean dollars on a private Ethereum blockchain as a part of ‘Project Ubin’ – an ongoing initiative to digitize its fiat currency using blockchain technology. Despite its traditional technology-forward agenda, most major cryptocurrency trading platforms aren’t based in the city-state – a fact highlighted by the central bank in today’s warning. “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,” the authority said, suggesting “a greater risk of fraud” when dealing with platforms backed by foreign operators.
The central bank went on to remind investors that they will not be afforded any insurance nor safeguards in cryptocurrency investments. In mid-November, the central bank issued guidelines on initial coin offerings (ICOs) and how they should be applied under existing securities laws.
Today’s notice comes despite recent remarks by the central bank’s managing director stressing it would keep “an open mind” on regulating cryptocurrencies. More pertinently, central bank chief Ravi Menon underlined that bitcoin itself “does not pose the risk that warrants regulation,” but intermediaries and activity surrounding cryptocurrencies, do.
Featured image from Shutterstock.
Last modified: May 20, 2020 9:15 PM UTC