Singapore government changes its mind, will regulate Bitcoin after all

In a reversal of its earlier stance, the Monetary Authority of Singapore (MAS), the country’s central bank, says that it will regulate virtual currency intermediaries that operate within its jurisdiction. Its goal is to address money laundering and terrorist financing risks. These intermediaries include the many Bitcoin exchanges and Bitcoin vending machines that have started operating in Singapore recently.

In a press statement, MAS says that virtual currency transactions are vulnerable to criminal use due to its anonymous nature. As such, virtual currency entities that “buy, sell, or facilitate the exchange of virtual currencies for real currencies” will need to verify the identity of their customers. They will also need to report suspicious activity to the Suspicious Transaction Reporting Office.

“The requirements will be similar to those imposed on money changers and remittance businesses who undertake cash transactions,” the statement adds.

The decision is an about face to an earlier comment: “Whether or not businesses accept Bitcoins in exchange for their goods and services is a commercial decision in which MAS does not intervene.”

Despite the impending rules, MAS says in its latest statement that it still “does not regulate virtual currencies per se” as it does not consider them securities or legal tender.

MAS does not have safeguards for investments made into virtual currencies unlike existing securities, which means virtual currency transactions carry “significant risks” due to their tendency to fluctuate greatly.

“Consumers and businesses should take note of the broader risks that dealing in virtual currencies entails and should exercise the necessary caution,” says Chong Tee Ong, deputy managing director of MAS.

The move is unlikely to affect local Bitcoin exchanges like itBit and FYB-SG, which already have Know Your Customer (KYC) practices in place. Bitcoin vending machines, however, have to change the way they operate.

Tembusu Terminals, which recently raised seed funding, has a customer identification feature baked right in. Numoni, meanwhile, has implemented light-touch KYC practices by collecting a user’s mobile number. Bitcoin Exchange does not identify customers yet, but the company says it is possible to add the feature to its machine.

Bitcoin point-of-sales services would be a grey area, since they would convert bitcoin to fiat currency for merchants after a transaction is made. Nonetheless, Coinpip, a Bitcoin point-of-sales startup, already features KYC functionality. Bitcoin wallets, meanwhile, would appear to be in the clear for now.

In additional to the negative press and fears surrounding the currency, the MAS regulations could add an additional barrier to first-time adopters as they will need to submit their identification documents when using a Bitcoin service for the first time.

(See: Here’s our map showing all of Singapore’s Bitcoin ATMs)

Rules unclear and unfair?

Tomas Forgac, founder of Bitcoin POS system Coin of Sale, points out that the announcement raises several problematic questions. First, since these regulations will affect Bitcoin businesses, it’s unclear who will compensate them for the costs of implementing measures that fall in line with the new rules.