Few years back, barely more than a small handful of people had any idea about cryptocurrencies. Today almost anyone who is literate knows about cryptocurrency. The interest in cryptocurrency is getting stronger by the day as the major cryptocurrencies like Bitcoin, Ethereum and Litecoin continue to soar in value.
Investors “FOMO” Mentality Strikes
As cryptocurrencies soar in value, the fear of missing out (FOMO) on cryptocurrency is also getting stronger. Since cryptocurrencies like Bitcoin, Ethereum and Litecoin have soared in value, the world is turning its attention to “coins” that are barely worth a few cents.
Recently, Dogecoin’s market capitalisation surged past US$2 billion. The coin was designed as a parody and has not released a software update in over two years. Despite that, its market cap grew more than five times. The current state of cryptocurrency is worrying to many, including Monetary Authority of Singapore (MAS).
3 Things To Know In MAS’ Stance On Cryptocurrencies
MAS has long made its stance against cryptocurrencies and has warned investors to be careful when investing in them. Basically, there are three things you need to know on Monetary Authority of Singapore’s (MAS’) stance.
1. No Protection From MAS
MAS has warned the public to be wary against cryptocurrency investments and to exercise extreme caution. MAS highlighted that it will not be able to offer any protection under legislation as cryptocurrencies are not the same as currency backed by MAS (i.e. Singapore dollars). MAS has time and again reminded the public that cryptocurrencies are not legal tender issued by any government nor are they backed by any asset or issuer.
2. Cryptocurrencies Have No Intrinsic Value
Because of the absence of protection from MAS, investors of cryptocurrencies run the risk of losing all their capital. This is because cryptocurrencies like Bitcoin do not possess any intrinsic value. Cryptocurrencies derive its value from the mining effort needed to obtain it, as well as its quantity hard cap. While some might argue that fiat currencies also do not possess intrinsic value, the fact is that fiat currencies are backed by central banks.
3. Don’t Think About Passing Off ICOs
The lack of regulation against cryptocurrency has led to a rising use of cryptocurrency as a bypass to traditional capital markets. Instead of doing an initial public offering (IPO) and float shares on the Singapore Exchange, digital tokens are now used to represent ownership or a security interest over an asset or property. These tokens are offered in an initial coin offering (ICO) process. The ICO process is where potential stakeholders pay fiat currency to buy the offered digital tokens.
Because of growing concerns over the misuse of ICOs, MAS has legislated that any organisation offering tokens that constitute a capital markets product will be subjected to the Securities and Futures Act. Issuers or intermediaries of such tokens must hold a capital markets services license, unless they are otherwise exempted. They would also be required to lodge and register a prospectus with MAS prior to the offer of such tokens, similar to an IPO prospectus.