Singapore won't ban cryptocurrency trading, but be warned of the risks: Tharman

It is an inherently unstable, high risk game.

Sulaiman Daud | February 08, 2018, 02:16 PM

Depending on who you talk to, cryptocurrency is either the hottest, most profitable commodity on the market, or a massive bubble just waiting to burst.

A few countries have already moved to introduce regulations on trading. China has already banned cryptocurrency exchanges, while South Korea is considering its own regulatory measures.

No plans to ban

But the small yet vibrant crypto community in Singapore don't have to worry about getting shut down.

According to Deputy Prime Minister Tharman Shanmugaratnam, the authorities have no plans to ban cryptocurrency trading.

In a written Parliament reply on Feb. 5, he said:

"The Monetary Authority of Singapore (MAS) has been closely studying these developments and the potential risks they pose. As of now, there is no strong case to ban cryptocurrency trading here."

However, he warned everyone that the authorities were watching this new currency trading very closely, and they would have no hesitation on coming down hard on anyone who breaks the law.

"But we will be subjecting those involved as intermediaries to our anti-money laundering regulations. And we will keep highlighting to Singaporeans that they could lose their shirts when they invest money in cryptocurrencies."


Illicit transactions

Tharman emphasised three areas of concern when it came to cryptocurrency trading:

  • Money laundering
  • Financing of terrorism
  • High-risk investment

He pointed out that as crypto transactions are anonymous, payments are decentralised and they take place at great speed, it is harder for the authorities to track the movement of funds used for criminal purchases.

The Monetary Authority of Singapore (MAS) will impose its anti-money laundering and counter-financing terrorism framework on cryptocurrency trading, the same as other currencies.

These new laws will be included in the proposed Payment of Services bill.

You could lose your shirt

But that's not the only risk involved. Tharman also spoke of the risks inherent in currency speculation:

"Cryptocurrencies such as bitcoins are a very high risk investment, subject to sharp swings in prices driven by speculation. They are also mainly traded on opaque markets, with no regulatory protection for investors. The big fall in bitcoin prices in recent weeks illustrates the risk.

But people must also beware of the marketing pitch by operators, encouraging them to put more money into cryptocurrencies when prices fall, in the hope of making money if prices surge again. It is in fact an inherently unstable, high risk game."

The value of Bitcoin and other popular cryptocurrencies recently declined in Jan. 2018. Tharman's statement comes after a similar announcement made by the MAS in Dec. 2017.

But it wasn't all negative, as he also pointed out the potential of the underlying technology behind cryptocurrency trading, blockchains and distributed ledgers:

"We will continue to encourage experiments in the blockchain space that may involve the use of cryptocurrencies, because some of these innovations could turn out to be economically or socially useful."

Blockchain explained for noobs:

Blockchain is just a digital ledger, a database that is a way of making, recording and verifying transactions online.

The difference is that instead of having one central database that one authority controls, blockchain data is shared across millions of computers around the world.

This is useful because hackers can't just hack one database to interfere with things like financial and voting records stored online, they'd have to hack every single computer in the chain, which is almost impossible.

Related story:

Top image from Group30 and Pixabay.