Month: October 2018

Singapore: Central Bank warns crypto exchanges and stops ICO

The Singapore Central Bank and Financial Supervisory Authority (MAS) announced on 24 May that it had warned eight crypto exchanges of the lack of licensing. In addition, it stopped an ICO and demanded the repayment of all investments from Singapore. Will the island state now start cryptoregulation after all?

Although Singapore has so far distanced itself from cryptoregulation and limited itself instead to anti-money laundering controls, crypto exchanges cannot operate in the island state as they please. Here the financial supervisory authority must issue a licence for securities trading before crypto exchanges can become active.

Previously unknown crypto exchanges warned about the Bitcoin secret

Non-licensed crypto exchanges are in constant danger of being warned by the state financial supervisory authorities about the Bitcoin secret as in this review. Once a warning has been issued to the exchange itself, its publication can follow quickly. As BTC-ECHO recently reported, the French and Belgian authorities had published blacklists of Bitcoin secret websites they wanted to warn users about. It is not difficult to guess what impact these announcements may have on the number of users. In addition, if the cautioned companies fail to act, there is of course a danger that the authorities will ban them.

The Singaporean MAS has not yet announced the names of the eight cautioned crypto exchanges. Nor is there any information on whether suspicious activities such as those in France had occurred on the platforms or complaints about the Exchanges such as those received in Belgium. The MAS stressed, however, with reference to the Securities and Futures Act (SFA), a law that provides for the regulation of activities and institutions in the securities, futures and derivatives industry:

“If the digital tokens are securities or futures contracts, exchanges must immediately stop trading these digital tokens until they have been authorised by the MAS as approved exchanges or recognised market operators.

Cryptosoft must be discontinued in Singapore

In addition, MAS asked an ICO issuer to stop its offer in Singapore. His token would represent the ownership right of a cryptosoft company and thus a security token according to the SFA. This, in turn, requires registration with the MAS, which is missing in this case. For this reason, the MAS demanded repayment of all cryptosoft investments from Singapore. According to MAS, the issuer has already complied with this demand:

“The [ICO] Issuer has suspended the Offer and taken remedial action to comply with the provisions of the MAS. It has also repaid all monies received from Singapore based investors.”

However, there is no precise information on the ICO and the amount issued. Lee Boon Ngiap, Assistant Managing Director of MAS, nevertheless does not want to give the impression that Singapore is introducing strict regulatory measures regarding crypto exchanges and ICOs. Instead, he announced that crypto offerings in Singapore had increased significantly. According to Finews.Asia, he stressed this:

“We see no need to restrict them when they are honest companies. However, if a crypto exchange, issuer or intermediary violates our securities laws, the MAS will take strict measures.

Crypto currencies are “economically and ecologically inefficient”

In the opening speech to a cash symposium of the Deutsche Bundesbank, its president Jens Weidmann denies crypto currencies such as Bitcoin to be considered money or currencies. He calls for global regulation and is convinced that digital money will not become a serious competitor for cash or bank balances in the foreseeable future.

The terms money and currency can only be applied to Bitcoin and other crypto currencies to a very limited extent, Weidmann said according to a speech published by the Bundesbank. The functions of money as a means of payment, value storage and unit of account were only fulfilled to a limited extent by crypto currencies, which is why he considers the term “crypto token” more appropriate.

For example, crypto currencies are hardly used as a means of payment because paying with them is comparatively cumbersome. Weidmann points out that transactions can take several minutes: “That may still be acceptable for buying a car, but Bitcoin is not suitable for paying at the cash register.

No gain in stability due to high power consumption

An important prerequisite for a functioning monetary system is confidence in its intrinsic value. In the case of banknotes, central banks would create this trust, while in the case of Bitcoin, trust would be created by increasingly complicated algorithms, among other things, which required ever higher power consumption. Weidmann referred to calculations by Carl-Ludwig Thiele, a member of the Bundesbank board, according to which a Bitcoin transaction consumes 460,000 times more electricity than a normal bank transfer.

In view of the high fluctuations in the value of crypto currencies, Weidmann said that electricity consumption was not offset by a gain in stability, which restricted its use as a means of payment.

“Nobody wants to give away a means of payment that rises strongly in value; nobody wants to accept a means of payment that loses strongly in value. Bitcoin is inefficient from an economic and ecological point of view”.

Global regulation makes sense

Regarding demands for a regulation of crypto currencies up to a ban, Weidmann said that possible losses in value alone do not justify a ban. It was important to enforce existing money laundering regulations. He pointed out that the European Money Laundering Directive is currently being revised so that operators of exchange offices and providers of e-wallets will in future have to monitor their customers within the framework of the usual due diligence obligations for financial institutions. However, national or European regulations could only be effective to a limited extent, which is why he wants to put the issue on the G20 agenda.

Regulatory intervention could give rise to potential financial stability risks, which are currently still limited. However, this could change if banks invest more in crypto currencies, provide investors with money for speculation with digital tokens or grant liquidity lines to crypto exchanges. The banks would have to back these risks with sufficient equity capital, which would be expensive from Weidmann’s point of view: “Given the high risk content, this would certainly be considerable capital requirements.