In a statement released yesterday, the MAS said virtual currency transactions are particularly vulnerable to criminal activity.
It will introduce regulations that require virtual currency intermediaries to verify the identities of customers and report suspicious transactions to the Suspicious Transaction Reporting Office.Virtual currency intermediaries buy, sell and facilitate the exchange of virtual currencies for real currencies.
Singapore, recently named the most expensive place to live in the world, does not regulate virtual currencies because it is not considered as securities or legal tender. This is the case in most jurisdictions.
The MAS regulations pertain specifically to the increase in criminal risk rather than the safety and soundness of virtual currency intermediaries and the proper functioning of virtual currency transactions.
The move will make Singapore one of the first jurisdictions to regulate virtual currency intermediaries for criminal risks.
The MAS said that it will consider further measures to address the risks if needed.
Deputy managing director of MAS, Mr Ong Chong Tee said: “MAS is taking a targeted regulatory approach to virtual currencies to specifically address money laundering and terrorist financing risks.
“Consumers and businesses should take note of the broader risks that dealing in virtual currencies entails and should exercise the necessary caution.”
Since June 2013 the MAS has told consumers and businesses of the risks held by virtual currencies due to a lack of safeguards under the Securities and Futures Act.
It says that fluctuating values may cause significant monetary loss and warned it may not be impossible to get a refund from a defunct virtual currency scheme if the currency issuer was anonymous.
In January, Singapore's government said it would tighten controls aimed at combating money laundering and terrorist financing in some sectors after the City regulator warned that financial controls “showed weakness”.
The sectors under scrutiny included remittance agents, money-changers, internet-based stored value facility holders, corporate service providers and pawnbrokers, according to a joint statement by the MAS, the Ministry of Finance, and the Ministry of Home Affairs.
The regulator added: “Weaknesses noted include lack of policies and procedures for updating of customer information and for conducting enhanced customer due diligence (CDD) for politically exposed persons (PEPs), as well as inadequate monitoring and review of dormant accounts and suspicious transactions."