Cryptocurrencies are digital currencies, as opposed to notes and coins which are fiat currencies. Currently, there are many kinds of cryptocurrencies, the more popular ones appear to be Bitcoin and Ethereum. Cryptocurrencies have no intrinsic value.
They are scarce and their worth depends on demand by investors. Transfers of cryptocurrencies can be made without the involvement of banks or other financial intermediaries.
Verification of such transactions are not done by banks but by computers through a decentralised ledger based on blockchain technology.
Risks of investing in cryptocurrencies
Cryptocurrencies are not legal tender and are not issued by any government or backed by any assets. Neither cryptocurrencies nor the operators of their platforms are regulated.
Many platforms offering cryptocurrencies operations are not based in Singapore and, therefore, it is difficult to gauge their authenticity and credibility. Cryptocurrencies are speculative assets and are exposed to price manipulation, thereby being highly risky.
They are highly volatile, eg the price of Bitcoin was about USD19,500 in Dec 2017 but has fallen to about USD7,400 in May 2018.
Cryptocurrency transactions are anonymous and are vulnerable to being used for unlawful activities. In Feb 2018, the PRC halted trading of cryptocurrencies and banned initial coin offerings.
In the USA the Dept of Justice is investigating into whether traders are using illegal means to trick others into buying or selling cryptocurrencies. In May 2018, the MAS in Singapore warned 8 digital token exchanges to cease trading in digital tokens and also warned an issuer of initial coin offering to cease offering of its digital tokens.
It is not certain whether cryptocurrencies would last in the long-term and, therefore, it is advisable to do research and seek professional advice before investing in cryptocurrencies.