Singapore is urging potential investors in digital currencies to beware, as a glut of cryptocurrency fundraising washes over the market.
The city-state has wasted little time in clamping down on the cryptocurrency providers seeking to raise funds: just last week, Singapore's financial overseer said it would follow the U.S. in regulating so-called initial coin offerings, or ICOs.
The fundraising method, which is the crypto version of initial public stock offerings, has become incredibly popular in recent months among the hundreds of digital currency providers.
Last week, finews.asia highlighted the case of Tezos, an U.S. provider which last month used a Swiss foundation to grab a nearly $20 million cash cut for its founders, after raising $232 million in the largest ever ICO to date.
Opaque, Risky
On Thursday, Singapore made clear it isn't another Switzerland, with police issuing a clear warning to potential investors.
«Members of the public are advised to exercise due diligence to understand the risks associated with ICOs and investment schemes involving digital tokens,» the Commercial Affairs Department said in an highly detailed advisory on the Monetary Authority of Singapore's website.
Cryptocoins are opaque, more susceptible to fraud schemes than other investments, are illiquid, highly speculative, have a high rate of failure, and may promise higher returns without properly cautioning of the high risk attached to them, the CAD and MAS said.
Criminal Risk
In addition, digital coin schemes are at risk of abuse by money-launderers and those involved in terror financing, due to often large sums of money which flow anonymously, authorities said.
«Consumers would be adversely affected if law enforcement agencies investigate any alleged illicit activities related to the token investment scheme,» the officials said.
Singapore's advisory is the regulatory equivalent of throwing down the gauntlet. Several prominent cryptocurrency providers, including Ethereum co-founder Vitalik Buterin, have moved to the Lion City.
