At a time when the ascent of what are called “virtual currencies” has become a talking point, with several states seeking to crack down on Bitcoin – a widely-known such currency – Singapore said it will act to prevent money laundering and terrorist financing.

At a time when the ascent of what are called “virtual currencies” has become a talking point, with several states seeking to crack down on Bitcoin – a widely-known such currency – Singapore said it will act to prevent money laundering and terrorist financing.

The Monetary Authority of Singapore yesterday announced it will regulate virtual currency intermediaries in Singapore to address potential risks.
 
The regulator said ”virtual currency transactions, given their anonymous nature, are particularly vulnerable to ML/TF risks”.

The Bitcoin virtual currency, for example, has prompted a variety of different regulatory responses. In the case of China, for example, authorities have restricted Bitcoin exchanges. The rise in interest in such forms of money stems from its attraction, some way, as an alternative to government, fiat-money systems that are vulnerable to being debauched by central bank money printing, such as the quantitative easing policies of recent years. There are also worries, however, that such money could be a conduit for illicit financial transactions, although the anonymity of such currency systems are debated.

The MAS said it will roll out rules to require virtual currency intermediaries 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. It says the rules resemble those imposed on money changers and remittance businesses in 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,” the regulator said.

Since June last year, MAS said it has been cautioning consumers and businesses of the “significant risks associated with virtual currency transactions”. Those risks include, it says:

-- Values of virtual currencies can fluctuate greatly within a short period of time;
 
--  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.