SINGAPORE: The Monetary Authority of Singapore (MAS) is urging the public to "act with extreme caution" and understand the "significant risks" they take on if they choose to invest in cryptocurrencies.
In a media release on Tuesday (Dec 19), the central bank said: "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.
"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."
It added that the recent surge in prices of cryptocurrencies is driven by speculation, and that 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," MAS warned.
Bitcoin, in particular, has had a spectacular rise this year. It started at US$1,000 per unit in January but by mid-December had shot to within striking distance of US$20,000, stoking fears of a bubble.
On Tuesday, MAS reminded the public that, as in most jurisdictions, there is no regulatory safeguard in Singapore for investments in cryptocurrencies. Investors who lose money from such investments will not be able to rely on any protection afforded under legislation administered by MAS.
It also pointed out that there is a greater risk of fraud as cryptocurrency transactions are generally anonymous, which makes them vulnerable to being misused for illegal activities.
In addition, the cryptocurrency intermediary can be hacked if it does not have robust security features, increasing the risk of loss for investors.
Underscoring the risks, the advisory came as a South Korean cryptocurrency exchange said it is shutting down and filing for bankruptcy after it was hacked for the second time this year.
The exchange, called Youbit, said all customers’ cryptocurrency assets will be marked down to 75 per cent of its value, adding it has stopped trading and will work to minimise customer losses.
This is the Singapore regulator's second such notice of caution in a year. In August, MAS and the Commercial Affairs Department (CAD) jointly issued a consumer advisory against the risks of digital tokens and virtual currency-related investment schemes.
"If the touted ease of making significant profits sounds too good to be true, it probably is," said MAS on Tuesday.
"Investors should carefully assess whether an investment in cryptocurrencies is suitable for their investment objectives and risk appetite."