The document discusses the legal and regulatory landscape of Bitcoin in Singapore, highlighting its classification as a taxable asset but not legal tender under current law. It outlines the benefits of Bitcoin, such as faster payments and innovation, while also addressing legal risks related to money laundering, fraud, and regulatory challenges. The paper advocates for a light-touch regulatory approach that encourages innovation while managing risks, suggesting various lenses for regulation including micro, macro, and international perspectives.

1. Some legal and regulatory issues
Bitcoin in Singapore
Lam Pak Nian
LLB (Hons), NUS
Sim Kee Boon Institute for Financial Economics, SMU
Presentation on 13 June 2014 at Lee Kong Chian School of Business, SMU
What is Bitcoin?
Benefits and legal risks
Regulating with a light touch

2. Bitcoin is…
Money?
– Medium of exchange, Unit of account, Store of
value
 Not legal tender
– Currency Act: Only currency issued by MAS
• (Not?) Property? In a ‘virtual’, decentralised
system?
– Torts/Personal/Intellectual property law:
conversion?
– Insolvency law: personal vs proprietary claim?
– Contract law: mistake, fraud?
13 June 2014 Lam Pak Nian 2
1. WHAT IS BITCOIN?

3. Regulators say Bitcoin is…
Taxable
– IRAS: Income from trading or mining
Not subject to MAS’s oversight
– Payment Systems (Oversight) Act targets
identifiable operator
– Not regulated per se but will be for AML/CFT:
• Tharman (21 Feb 2014), MAS Press Release (13
Mar 2014)
13 June 2014 Lam Pak Nian 3
1. WHAT IS BITCOIN?

4. Main benefits
• Faster and cheaper payments
• Possibility for further innovation
13 June 2014 Lam Pak Nian 4
2. BENEFITS AND LEGAL RISKS

5. Legal risks
• Money laundering and terrorist financing
• Counterparty risk in a decentralised system
– Who bears the loss in a defective transaction,
mistake or fraud?
• Miner (who?), exchange, end user?
– Unclear; needs to be sorted out in the law
• Torts/Personal/Intellectual property law: conversion?
• Insolvency law: personal vs proprietary claim?
• Contract law: mistake, fraud?
13 June 2014 Lam Pak Nian 5
2. BENEFITS AND LEGAL RISKS

6. Legal risks
• Money laundering and terrorist financing
– AML/CFT regime: criminalisation,
confiscation and reporting
• Corruption, Drug Trafficking and Other Serious
Crimes (Confiscation of Benefits) Act (CDSA)
• Terrorism (Suppression of Financing) Act
– Suspicious Transaction Reporting Office
• Money changers and remittance businesses: keep
records and do due diligence > $5000
• MAS will extend reporting requirements to “virtual
currency intermediaries”
13 June 2014 Lam Pak Nian 6
2. BENEFITS AND LEGAL RISKS

7. Policy considerations
• Prudential regulation of financial system
– Reduce information asymmetry
• Bitcoin is difficult to understand
– Promote systemic stability
• Reputation risk of financial institutions
• Payment methods pose substantial systemic risk
as failures impede the ability of parties in meeting
their payment obligations
13 June 2014 Lam Pak Nian 7
3. REGULATING WITH A LIGHT TOUCH

8. Policy considerations
• Constructive involvement
– Bitcoin is here to stay and impossible to shut
down
• Encourage beneficial uses and future innovation
and meaningfully minimise risks
– Impulsive to ban disruptive tech as knee-jerk
reaction to illicit activity
• Long-term reform
– Uncertain laws and regulatory environment
hamper breakthrough inventions like Bitcoin
13 June 2014 Lam Pak Nian 8
3. REGULATING WITH A LIGHT TOUCH

9. Three lenses for regulation
• Micro lens: Address specific risks first
– Prevent criminal activity via existing checkpoints
(also US FinCEN’s approach)
• Macro lens: Prudential regulation & stability
– Advocacy and advisory to reduce information
asymmetry
– Promote systemic stability with self-disclosure
– Allow laws, rules and confidence to develop
• Int’l lens: Coordinate meaningful regulation
– BIS’s Basel Committees? IMF?
– Sui generis Bitcoin Convention?
13 June 2014 Lam Pak Nian 9
3. REGULATING WITH A LIGHT TOUCH