Monetary Authority wants to curb cryptocurrencies

The Monetary Authority of Macao is trying to curb cryptocurrency-related activities in response to reports that Macau might become a regional hub for the financial instruments.

As reported earlier this month, Macau has been designated a jurisdiction to watch closely in regards to cryptocurrency activities, after mainland China and neighboring Hong Kong clamped down on the sector last year.

With more stringent regulations elsewhere, cryptocurrency operators are looking to jurisdictions like Macau, which has a history of sheltering shady businesses.

In a statement to the Times, the Monetary Authority of Macao said that it does not approve of such business and that it has reminded the financial services industry to avoid cryptocurrencies.

“Virtual currency is a virtual commodity which is neither legal tender nor a financial instrument subject to financial supervision,” the authority wrote in a statement.

“This Authority has already sent a circular to remind all the banking and payment institutions in Macau not to participate in or provide, directly or indirectly, any financial services in relation to such trading, so as to curb the occurrence of the relevant activities in Macau.”

The statement will be unwelcome news for Macau Dragon Group, a new company with plans to develop a Macau-based floating casino using cryptocurrency- backed gaming chips.

It remains unclear whether the Macau Gaming Inspection and Coordination Bureau and the Monetary Authority of Macao will permit the casino to operate in the MSAR or its territorial waters.

The concern for regulators in Macau and elsewhere is that the cryptocurrency market is developing at a rapid and unpredictable pace, and that its volatility might threaten the overall economy.

“Trading of these commodities involves considerable risks, including but not limited to those relating to money laundering and terrorism financing,” the statement continued.

Through a series of initiatives spearheaded by the central government in Beijing, the Macau government has made significant progress in curbing money laundering and terrorism financing in the territory.

However, Macau’s regulatory environment remains far from watertight, as evidenced by recent European Union threats to include it on a tax ‘blacklist’.

The threat was ultimately withdrawn after the MSAR government agreed to strive for further financial transparency.

Warnings issued over ‘risky’ asset

Deutsche Bank AG’s Wealth Management currently does not advise to invest in cryptocurrencies, according to Markus Mueller, Global Head of Chief Investment Office. Problematic issues include high volatility, possible price manipulation and data loss or data theft.

“We do not recommend that. It’s only for investors who invest speculatively,” he said. “There is a realistic risk of total loss.”

According to Mueller, recent price increases reflect a lot of imagination, driven by the current situation in the market. There is hardly any return scope left in other asset classes such as fixed income, he said.

Mueller is not the only person warning against crypto-currencies. Bank of Spain Governor Luis Maria Linde said crypto-currencies are an asset that carries enormous risks. And Austria’s Financial Planners Association compared bitcoin investments with a “casino visit”.

Bitcoin, the world’s most popular cryptocurrency, is currently trading nearly 50 percent lower than its December 16, 2017 high, recorded after a 10-day streak of rapid gains.