Singapore backtracks, unveils new Bitcoin regulations

Singapore backtracks, unveils new Bitcoin regulations

Summary: After stating it won't restrict transactions involving the digital currency, Monetary Authority of Singapore now says operators of virtual currencies including Bitcoin ATMs must abide by new rules to address risks associated with terrorist funding and money laundering.

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Singapore has backtracked on its previous stance not to impose restrictions on Bitcoin transactions, deciding to now regulate the crytocurrency in a bid to safeguard against terrorist funding and money laundering. 

The Monetary Authority of Singapore (MAS) said in a statement Thursday it will "regulate virtual currency intermediaries" operating in the country due to the associated risks. These intermediaries include operators of Bitcoin exchanges as well as Bitcoin vending machines. 

Just two weeks ago, Singapore-based trading platform, Bitcoin Exchange, launched the first two Bitcoin ATMs in the city-state, located in a bar in the CBD while the other is in an underground shopping area along Orchard Road. 

The exchange will now need to abide by new rules stipulated by the MAS. 

In its statement, the regulator said it will introduce legislations requiring virtual currency intermediaries that buy, sell, or facilitate the exchange of such currencies for real currencies to verify the identities of their customers. They are also to report "suspicious transactions" to an intelligence unit within the country's Commercial Affairs Department, MAS said, adding that this is already required of money changers and remittance businesses handling cash transactions. 

The new regulations are necessary due to the anonymous nature of virtual currency transactions, making them particularly vulnerable to money laundering and terrorist financing risks, it noted. 

"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," the regulator explained.

It further reiterated its warning that investors of virtual currencies will bear the risks of transacting in such currencies, and will not enjoy the safeguards that investors in securities have under Singapore's Securities and Futures Act as well as the Financial Advisers Act.

MAS had previously underscored the high risks associated with virtual currencies, pointing to the volatility of their prices and the lack of any identifiable legal issuer. 

The regulator's deputy managing director, 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."

The regulator said the new regulations will be among the first in the world to be implemented in a country, and additional rules may be further introduced to address associated risks. MAS added that it will monitor developments of virtual currencies and other regulatory measures undertaken by major jurisdictions. 

The announcement comes just days after the mysterious death of Autumn Radtke, CEO of a Singapore-based virtual currency exchange First Meta, which platform processes the sale and purchase of currencies including Bitcoin, Linden dollars (used in Second Life virtual world), and FriendsHangout Tokens. Established in February 2007, First Meta was the first virtual bank to provide credit card and corporate financial services in Second Life.

At least three Bitcoin exchanges in recent weeks had lost customer funds due to cyberattacks, prompting two to file for bankruptcy protection. Poloniex just last week admitted it lost 12.3 percent of Bitcoins--worth about US$50,000--stored in hot wallets on the website. Trading was halted, and CEO Tristan D'Agosta said processing and design flaws in its system had allowed hackers to commit the theft. He said he was looking at ways to compensate his customers. 

The Poloniex theft had followed that of Mt. Gox, which shuttered last month and filed for bankruptcy protection in Japan after years of undetected infiltration in which hackers stole 750,000 customer-owned Bitcoins and Mt. Gox's own stash of some 100,000 coins, estimated to be worth a total of US$500 million. System design flaws, hackers, and poor accountancy practices were blamed for the losses.

A third exchange, Flexcoin, also shut its doors after hackers stole 896 Bitcoins estimated to be worth about US$606,000.

Topics: Banking, E-Commerce, Singapore

About

Eileen Yu began covering the IT industry when Asynchronous Transfer Mode was still hip and e-commerce was the new buzzword. Currently a freelance blogger and content specialist based in Singapore, she has over 16 years of industry experience with various publications including ZDNet, IDG, and Singapore Press Holdings.

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17 comments
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  • So, today, bitcoin is a "virtual currency"

    At least as far a Singapore is concerned, anyway.
    Rabid Howler Monkey
    • That's a reasonable decision

      But it doesn't bode well for ideologically-motivated Bitcoin users that one of the most pro-business jurisdictions on the planet has decided to regulate Bitcoin transactions.
      John L. Ries
      • Agreed, it makes much more sense than a commodity or virtual commodity

        I'm just entertained by the divergence in how bitcoin is viewed by various countries (and, especially, bitcoin proponents).
        Rabid Howler Monkey
        • I've always viewd Bitcoin as a virtual commidity

          as that's how it's traded as.
          William.Farrel
          • Well, there's Japan ...

            http://www.morningstar.com/advisor/t/88248291/japan-to-define-bitcoin-as-a-commodity-nikkei.htm

            The Morningstar article itself refers to bitcoin as a 'virtual currency'.
            Rabid Howler Monkey
      • It's good news, not bad!

        You cant regulate Bitcoin transactions, except where fiat is involved. And most bitcoin users want regulation. It will weed out the cowboys, like Mt Gox, and give the green light to businesses to use it.
        stuorguk
        • But if the goal...

          ...is to get the state out of the business of regulating money and economic affairs on the theory that the free market can adequately regulate itself, then this has to seen as a setback. Nevertheless, I think more pragmatic Bitcoin users will see modest regulation as a plus.
          John L. Ries
          • The goal has alrealy been achieved....

            ... you cant regulate Bitcoin. Governments can't interferer with it.

            At best, governments can make fiat exchange difficult, or as we have seen, risky. So this news can only be positive. New York is looking to go the same way. Then hopefully London.
            stuorguk
          • How can the goal be achieved if it differs from the original idea?

            It set out to be a "virtual currency", but is now treated as a virtual commodity.

            Therefor it will be regulated as a commodity, no different then regulating gold.
            William.Farrel
          • I beg to differ

            Governments are interfering with Bitcoin already and that will continue for a while. How effectively remains to be seen.
            John L. Ries
  • Bitcoin is not different than anything else termed currency.

    Bitcoin is as 'currency/money' as USD/SGD/YEN going by money as a medium-of-exchange. The only 'real' currency is paper bill notes - the paper being the reality. Bank deposit accounts is just as virtual as Bitcoin. Government endorsement of fiat currency do not make fiat any more 'real' than Bitcoin. If the world's governments decide to adopt Bitcoin as the only global currency, the economies would still work - better or worst is only a guess or opinions.
    meAbdullah
  • Its a commodity

    money is also a commodity, many commodities can be used as currencies, but that does not make them therefore money, (legal tender).

    Bitcon's are a commodity, and a currency (they can be used for trade), just like a farmer uses chickens to trade for seed, but that does not make chickens money, even if they are sometimes used as a currency, and are a commodity.

    Money is legal tender, its is what HAS to be accepted as currency, a vendor may accept other forms of currency (like chickens), but again that does not make it legal tender, or 'money'.
    So bitcons can be a commodity and currency, but its just not money.
    Aussie_Troll
    • Legal tender is not illegal.

      If you want to talk about strict definitions, say, just settle on that from the Oxford's Dictionery and forget about it. Gold was once money and now you can't pay tax with gold. It is illegal not to accept that legal tender is legal.
      meAbdullah
    • Don't think so

      It seems to me that a commodity is valuable in and of itself, not merely as a medium of exchange. Thus, metals and grain are commodities; dollars and poker chips are not. Bitcoin would fall in the latter category.
      John L. Ries
      • but money does have value

        I can pull a fiver out of my pocket and purchase a cup of coffee, that $5 has inherent value, its legal tender, and a commodity, money has value because of the economy that backs it.

        Bitcoins don't have a supporting economy, the only value inherent in bitcoins is the dollar value assigned to it.
        That value is only real is someone is willing to pay dollars for it.

        A $640 dollar bitcoin is worth nothing unless someone is willing to pay for it with $640 dollars of real money.
        But that $640 dollars will always be worth $640 dollars..
        Aussie_Troll
        • You just don't understand

          "But that $640 dollars will always be worth $640 dollars.."

          Aussie_Troll, your closing statement highlights that you do not understand this stuff.

          Inherent value exists regardless of nation or law. Grain and livestock, for example. Gold and silver, technically speaking, have notable physical properties like conductivity, malleability, etc. Money (paper & coin) can easily become useless, such as in times of war.
          alboulley
        • Bitcoin is true money

          You should know that there are many who are pro-bitcoin and they have reasons; and certainly not all of those are fools. I understand you very well; the moment you talk about intrinsic values of currency, money and about the USD being backed by governments means that you cannot yet understand why bitcoin is not as you imagine. One cannot have real knowledge unless one has the basics. The absolute pre-requisite to understand Bitcoin are: 1) a little formal understanding of money, fractional reserve banking.2) some technical knowledge about computer science and how the internet works (for the technical part of bitcoin). Bitcoin is true money - as true as the national currencies existing now.
          meAbdullah