Be cautious, but keep open mind on cryptocurrency

The Monetary Authority of Singapore's (MAS') warning to would-be investors of cryptocurrency to act with "extreme caution" given the significant risks is a fair one (MAS warns bitcoin investors to act with 'extreme caution'; Dec 20).

While the MAS is right in saying "investors in cryptocurrencies should be aware that they run the risk of losing all their capital", this reflects the inherent nature of investing.

For instance, I have lost almost all the capital I invested in LionGold shares, which are at the moment worth almost nothing. Hence, I do not consider investing in shares to be any less risky than investing in cryptocurrencies, although equities are regulated by MAS.

MAS' fintech chief Sopnendu Mohanty had pointed out that bitcoin has no intrinsic value. While this may be true, paper currencies also do not possess intrinsic value.

Towards the end of World War II, the United States pegged the US dollar to gold and many countries pegged their currencies to the US dollar under the Bretton Woods agreement. However, the US took itself off the gold standard in 1971, leaving paper currencies to be backed by only the people's trust.

Bitcoin derives its value from the mining effort needed to obtain it, as well as its hard cap of 21 million.

Mr Mohanty also asked if it is possible to buy a house with bitcoin, or to use the cryptocurrency for daily transactions. CNBC reported in October that a buyer purchased a newly built home in Austin, Texas, using bitcoin. TenX, a fintech company based in Singapore, has also been issuing cryptocurrency debit cards, which allow one to spend one's bitcoin and other cryptocurrencies through Visa terminals at retail outlets.

Bitcoin and other cryptocurrencies may well be the future.

While it is good for the public to be cautious about investing in cryptocurrencies, it is not helpful for the Singaporean public to have overly negative prejudices towards them as it could lead to our nation becoming slower to adopt this new technology compared with our Asian neighbours.

Chan Yeow Chuan

A version of this article appeared in the print edition of The Straits Times on December 22, 2017, with the headline 'Be cautious, but keep open mind on cryptocurrency'. Print Edition | Subscribe