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Not true that all cryptocurrencies have no intrinsic value

I do not agree with senior correspondent Goh Eng Yeow's remark that cryptocurrencies have "no intrinsic value whatsoever and no government backing" (Calm global markets, but risks lurk beneath; Sept 6).

In a statement last month, the Monetary Authority of Singapore (MAS) observed that "the function of digital tokens has evolved beyond just being a virtual currency", and that "digital tokens may represent ownership or a security interest over an issuer's assets or property" (MAS clarifies when digital token offers will be regulated; Aug 2).

An example of this would be the cryptocurrency OneGram, where the issuer backed each coin with one gram of gold at launch.

In the case of bitcoin, evaluating its intrinsic value indeed could be more problematic, as it is not backed by any specific material asset. However, this is not the same as saying that bitcoin has zero intrinsic value - in a Forbes magazine article in June, it had been suggested that the intrinsic value of bitcoin is "the representation of the effort it takes to mine it", that is, the cost for bitcoin miners to set up their mining equipment, pay for electricity, and so on.

Hence, while the value of some cryptocurrencies is questionable, it is not true that all cryptocurrencies have no intrinsic value.

Chan Yeow Chuan

A version of this article appeared in the print edition of The Sunday Times on September 10, 2017, with the headline 'Not true that all cryptocurrencies have no intrinsic value'. Print Edition | Subscribe