Written by Ashley Boncimino
Bitcoin has a new frenemy in Singapore after the country’s announcement that the virtual currency’s intermediaries would be subject to regulations aimed at minimizing risk of money laundering and terrorist financing.
Singapore’s move is understandable in light of the recent collapse of major Bitcoin exchange MtGox, which lost 850,000 Bitcoins or USD 474 billion, where it is uncertain whether the money was stolen or simply mishandled.
Singapore’s decision is yet another reversal of its earlier positions, which at first were not to intervene. In January, the country issued guidance on how transactions were to be taxed.
Its new position, to install middlemen to verify customer identities, all but castrates the currency’s promise of anonymity, what some would call Bitcoin’s primary benefit and promise. However, Singapore is the second country to impose such regulations.
The Monetary Authority of Singapore (MAS) said it would require 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.”
The MAS said intermediaries were “particularly vulnerable” for use as terrorist financing and money laundering. Middlemen would also be required to report suspicious transactions. The MAS noted the regulations would be similar to those imposed on money changers and remittance businesses that handle cash transactions.
“MAS is taking a targeted regulatory approach to virtual currencies to specifically address money laundering and terrorist financing risks,” said deputy managing director of MAS Ong Chong Tee. He also warned consumers and businesses to “take note of the broader risks” of dealing in virtual currencies.
Singapore saw its first Bitcoin ATM early in March by Singapore-based Tembusu Terminals, garnering media attention and excitement from enthusiasts.
But while Singapore formally does not recognize Bitcoin as a currency, the country is not the first to announce intentions to regulate it.
After the collapse of MtGox, Japan announced plans to set rules for Bitcoin exchanges and tax transactions, while Britain announced it would abort plans for a value added tax on Bitcoin trading.
Not all welcome Bitcoin, however. The Bank of Thailand warned against buying virtual currencies, saying the currency is not legal tender, as did Indonesia. Vietnam went as far as to ban the currency, saying it was too easy for the currency to become a tool for money laundering, drug trafficking, tax evasions and illegal payments. China Central Bank banned financial institutions from Bitcoin transactions, while Hong Kong Monetary Authority said Bitcoin was a commodity rather than a currency.
Russian authorities have warned against Bitcoin, saying treating it as a parallel currency is illegal, while the European Central Bank released a report in late 2012 on “virtual currency schemes.”
For most countries, Bitcoin is the wild west of currency and monetary policy. Singapore may be friendlier than many, but its cautious attitude towards the five-year-old software is still very much in place. Regulations may take away what some love about Bitcoin, but it may be the only way to legitimize it.
In the recent development, the company named Tembusu Terminals tried to change the view of the virtual currency in Singapore, showcasing the feasibility of exchanging money for bitcoin on the go. As of now, the one month old company, have installed six of such exchange machines in Singapore, producing paper receipt of bitcoins when loaded with cash.
–Edited by Mohamed P.Hassan