MAS takes first step towards rules regarding virtual currencies

Authorities in Singapore are taking the first step in setting up rules regarding virtual currencies such as bitcoins.

Get the full story from The Straits Times.

Here is the statement from MAS:

The Monetary Authority of Singapore (MAS) said today that it will regulate virtual currency intermediaries in Singapore to address potential money laundering and terrorist financing (ML/TF) risks.

Virtual currency transactions, given their anonymous nature, are particularly vulnerable to ML/TF risks. To address this, MAS will introduce regulations to require virtual currency intermediaries1 that buy, sell or facilitate the exchange of virtual currencies for real currencies to verify the identities of their customers and report suspicious transactions to the Suspicious Transaction Reporting Office.2 The requirements will be similar to those imposed on money changers and remittance businesses who undertake cash transactions.

Singapore, like most jurisdictions, does not regulate virtual currencies per se, as these are not considered as securities or legal tender. MAS' regulation of virtual currency intermediaries pertains specifically to the money laundering and terrorist financing risks they pose. It does not extend to the safety and soundness of virtual currency intermediaries nor the proper functioning of virtual currency transactions. Investors in virtual currencies will not have the safeguards that investors in securities enjoy under the Securities and Futures Act and the Financial Advisers Act.

Therefore, since June 2013, MAS has been cautioning consumers and businesses of the significant risks associated with virtual currency transactions:

The values of virtual currencies can fluctuate greatly within a short period of time. Consumers and businesses may suffer significant monetary losses as a result of the volatile prices. Virtual currencies may not be issued by any identifiable organisation. Consumers and businesses may not be able to obtain a refund of their monies should virtual currency schemes or intermediaries cease to operate.

Deputy Managing Director of MAS, Mr Ong Chong Tee, said, "MAS is taking a targeted regulatory approach to virtual currencies to specifically address money laundering and terrorist financing risks. Consumers and businesses should take note of the broader risks that dealing in virtual currencies entails and should exercise the necessary caution."

MAS' move will make Singapore one of the first countries in the world to regulate virtual currency intermediaries for ML/TF risks. MAS will continue to monitor closely the development and implications of virtual currencies as well as evolving regulatory approaches taken towards virtual currencies by major jurisdictions. If necessary, MAS will consider additional measures to address the risks posed by virtual currencies and their intermediaries.