The Monetary Authority of Singapore (MAS) has issued a statement on Tuesday, December 19 warning Singaporeans who are in the cryptocurrency trade to be cautious of their investments. Amid the bubble of virtual currencies like bitcoin, MAS reminds investors that cryptocurrencies are not supported by any central bank.
In the most unfortunate circumstance that cryptocurrency investors will lose their money, no Singaporean laws will be there to protect them. The value of cryptocurrencies versus real currencies make it very attractive, but MAS warns of the sudden rise and fall in prices.
Also read: North Korean hackers behind WannaCry took home millions in cryptocurrencies, say analysts
Global bitcoin prices have skyrocketed by 20 times in 2017. On Tuesday, the cryptocurrency trading surpassed US$19,000.
Regulators in other countries have also warned their citizens of its potential risks, including the US Federal Reserve. Regulators in South Korea also prohibited financial institutions in the country from dealing in virtual currencies.
On Tuesday, virtual currency exchange YouBit announced it is filing for bankruptcy after it was hacked for the second time this year, losing 17 percent of its assets. Digital fingerprints pointed to North Korea-backed hackers.
Learn what MAS has to say regarding the dangers of investing in virtual currencies in its full media statement below:
MAS's full press statement
1. The Monetary Authority of Singapore advises the public to act with extreme caution and understand the significant risks they take on if they choose to invest in cryptocurrencies. 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.
2. 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.
3. MAS considers the recent surge in the prices of cryptocurrencies to be driven by speculation. 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.
4. There is no regulatory safeguard for investments in cryptocurrencies. 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.
5. 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 a greater risk of fraud when investors deal with entities whose backgrounds and operations cannot be easily verified.
6. Cryptocurrency transactions are generally anonymous, which makes them vulnerable to being misused for unlawful activities. If a cryptocurrency 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 cryptocurrency intermediary be hacked, as it may not have sufficiently robust security features.
7. 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. Before investing in cryptocurrencies, members of the public should carefully consider the claims being made about the products being offered â if the touted ease of making significant profits sounds too good to be true, it probably is. Investors should carefully assess whether an investment in cryptocurrencies is suitable for their investment objectives and risk appetite.
8. Members of the public who suspect that an investment involving cryptocurrencies could be fraudulent or misused for other unlawful activities should report such cases to the Police.
9. For more information on cryptocurrencies and cryptocurrency investments, please refer to MoneySENSE's consumer alerts.