Regulating Use of Virtual Currencies

Ms Mary Liew asked the Prime Minister (a) if he will be regulating the use of virtual currencies like Bitcoins traded by Singapore-based businesses and Singaporean consumers; and (b) whether there are plans to educate Singaporeans on the risk of trading or investing in virtual currencies.

Bitcoin is an example of a virtual currency11 that is distributed, open-source, peer-to-peer, and is protected by cryptography.

MAS currently does not regulate Bitcoins. They are not legal tender like the notes and coins issued by MAS. They are also not considered securities under the Securities and Futures Act.

But Bitcoins are not without risk. MAS has published a consumer alert12 to warn Singaporeans about these risks. Unlike legal tender, such as the Singapore Dollar, which is issued and backed by the Government, there is no legal obligation for individuals or businesses to accept virtual currencies. Virtual currencies like Bitcoin are typically not backed by an identifiable organisation. As a result, should the virtual currency cease to be accepted or the scheme cease to operate, users may not be able to obtain a refund of their monies.

The value of virtual currencies can also fluctuate greatly within a short period of time. For example, the price of one Bitcoin peaked above US$1,100 in December 2013 and has since dropped to around US$700 in early February 2014.

MAS has, therefore, been advising individuals and businesses to think twice and be cautious about accepting or dealing in virtual currencies. Many countries have likewise warned of the risks of accepting or trading in virtual currencies. However, there is currently no international consensus on the regulatory treatment of virtual currencies. MAS will closely monitor how widely virtual currencies are used in Singapore, the risks they pose, and international developments, and will consider the need to introduce regulations where appropriate.

Page: 60