Published: April 12th, 2021
The cryptocurrency market cap surged past $2 trillion in the week that ended on Saturday, April 10. Despite the colossal milestone that also represents an increase in mainstream acceptance of virtual currencies, even crypto-friendly governments such as Singapore and South Korea warn the public to exercise caution before buying. Could the warnings preempt stricter regulations?
During the week that ended on Saturday, April 10, the cryptocurrency market cap dashed past $2 trillion. The milestone is an indication of the continued acceptance of virtual currencies by mainstream commerce. Already, the names tiptoeing into the cryptocurrency sphere are increasing with each day.
On Thursday, April 8, State Street, the second-oldest continually operating multinational U.S. bank and asset manager, announced that it would loan its trading technology to Pure Digital. Pure Digital is a digital currency trading platform that seeks to become the leading Bitcoin getaway for institutions.
Despite the many positives recorded in the industry, Singapore, considered one of the most crypto-friendly governments globally, is warning its public to exercise caution before buying crypto.
Tharman Shanmugaratnam, the Monetary Authority of Singapore (MAS) chairman, warned investors to watch out when buying, selling, or trading cryptocurrencies because they are very volatile. The official said that virtual currency prices are typically not attached to any economic fundamentals.
While responding to a parliamentary question regarding the crypto market status, he said virtual currencies are very risky investment tools and are not suitable for retail investors. The Singaporean government's warning comes even as other countries in Asia are toughening their stance or rhetoric about Bitcoin and other altcoins.
Earlier this month, India proposed a new regulation that requires all companies to declare every cryptocurrency transaction in their balance sheets. Meanwhile, Japan and South Korea have also issued stern warnings to their nationals regarding the pitfalls and potential risks of cryptocurrencies.
Kenneth Bok, a Singapore-based crypto trader and investor, said the virtual currency bull market is responsible for the warnings flying across the region.
Bok said that, like 2017, the world is seeing a surge in projects of lesser quality. Since such a phenomenon is common during bull market cycles, authorities are compelled to issue warnings to the general public to protect them. Often, many investors get caught up in the created frenzy, throwing their money into irrational investments, Bok added.
Earlier in the week that ended on Saturday, April 10, the Singaporean local media reported that about 100 police reports had been filed against Torque, an online crypto exchange operated by Bernard Ong.
Ong, a Singaporean businessman, alleged that his platform's employee made unauthorized trades that cost his platform a substantial loss. The exchange, which is currently being liquidated, has suspended more than 14,000 investor accounts, including accounts of many individuals who lost their life savings.
Meanwhile, On Friday, April 2, Singapore's Prime Minister, Lee Hsien Loong, took to Facebook and Twitter, where he ranted that his social media handles had been used by BitClout, a cryptocurrency platform, to mislead the public, without his permission.
BitClout has come under scrutiny recently. The crypto platform, which doubles as a social network, allows users to trade creator coins tied to their Twitter profiles. The social network has preloaded profiles of the leading 15,000 influencers from Twitter, a move that has drawn criticism regarding BitClout's rollout.
Lee complained about BitClout's creators' anonymity, adding that he has sent an open message asking that the site's developers bring down his name and photo from the site since he has nothing to do with BitClout. By the time of going to press, the premier's profile had been removed from the platform.
Premier Lee appealed for vigilance when transacting with cryptocurrency platforms. He said members of the public who choose to deal with exchanges and other related platforms that MAS does not license would not be covered by the laws governing the regulatory body. Before undertaking any transaction or making any investment, an individual has to ensure the deals they are getting are genuine and legitimate, Lee said. He added that doing such due diligence would help them from falling prey to scams.
Meanwhile, a report by DBS Bank, a Singapore-based multinational, on the status of virtual currencies stated that mainstreaming of the major crypto coins continues mostly with broadening inflow of capital from corporate and institutional sources.
However, the report noted that retail capital, though meager, is also growing. The launch of a growing number of innovative digital asset products recently and the adoption of crypto by mainstream financial institutions have contributed to the increasing inflow of capital.
Rapid changes often increased speculation, skepticism, excesses, and regulatory reaction, and the crypto industry is no exception.
Despite the swelling interest in virtual currencies, the Singapore crypto market is still tiny compared to its bonds and stocks counterparts. The total daily peak trading volumes of Bitcoin, Ethereum, and Ripple, the three Singapore dollar-quoted coins, is about 2% of the average volume of stocks and equities moved on the Singapore Exchange (SGX) daily.
Elsewhere, Japan's Financial Services Agency has issued an advisory warning it's public about the dangers of undertaking crypto investments. The agency has also spelled out the necessary precautions to protect the public from falling prey to scams.
In South Korea, officials converged for a Virtual Asset-related Ministry Meeting to deliberate on the extent of the necessary public warnings. The meeting came in the wake of the extraordinary increase in Bitcoin prices. During the week that ended on Saturday, April 3, Bitcoin prices surged above $70,000 in Seoul, a staggering 21% above prices elsewhere.
Asian governments, including the otherwise crypto-friendly Singaporean administration, are warning their nationals to exercise extreme caution before investing in virtual currencies. The warnings come amidst increasing mainstream acceptance of the significant cryptocurrencies. Just last week, the crypto market cap surged past $2 trillion for the first time. However, the approval comes with varied excesses and scams, hence the warnings.