The Monetary Authority of Singapore (MAS) has released an advisory telling the public to “act with extreme caution and understand the significant risks” when it comes to cryptocurrency investments.
Recent escalation of cryptocurrency prices, especially Bitcoin, have made such investments appealing.
However, the central bank maintained that cryptocurrencies are not legal tender, and are not backed by any asset or issuer.
“MAS considers the recent surge in the prices of cryptocurrencies to be driven by speculation,” a statement read.
“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,” it added.
Singapore currently does not regulate cryptocurrencies, and MAS rules do not extend to the safety of cryptocurrency intermediaries or the proper processing of cryptocurrency transactions.
“As most operators of platforms on which cryptocurrencies are traded do not have a presence in Singapore, it would be difficult to verify their authenticity or credibility,” MAS said, adding that there is a greater risk of fraud as a result.
MAS said that as cryptocurrency transactions are generally anonymous, they are vulnerable to being misused for unlawful activities.
And when a cryptocurrency intermediary is found to have used cryptocurrencies illegally, its operations could be shut down by law enforcement agencies.
There is also a risk of hacking, as cryptocurrency intermediaries may not have sufficiently robust security features, MAS said.
“Before investing in cryptocurrencies, members of the public should carefully consider the claims being made about the products being offered – if the touted ease of making significant profits sounds too good to be true, it probably is,” the bank said.