In an interview with CNA Asia (to be telecast Jan 25 at 8.30pm), Mr Mohanty pointed out that regulators around the world are keeping a close watch on cryptocurrency trades, and there is “a great indication that regulators are getting serious about this whole cryptocurrency market”.
He added that as the market for digital currencies like Bitcoin continue to grow, regulators would eventually step in to apply consumer-protection regulation that will correct the hype.
“We know exactly when to intervene, based on the market size and the demand and transaction volume, and we will come in at the right time. So, I’m not overly worried about getting to some large financial system crisis,” he said.
From 2017 to 2018, Bitcoin’s price skyrocketed by more than 1,300 per cent – hitting an all-time high of US$ $19,783 on December 17 , 2017 – and feeding a global buying frenzy.
However, critics like famed billionaire investor Warren Buffett have called the Bitcoin a “mirage” and said that cryptocurrencies “will come to a bad ending”. Chief executive officer of JPMorgan Chase & Co Jamie Dimon has also called Bitcoin “ a fraud”.
Against the backdrop of Bitcoin’s seemingly relentless gains last December, the MAS issued a strong warning to investors to act with “extreme caution”.
Financial regulators in around the world are also clamping down on cryptocurrencies – last year, Chinese authorities banned cryptocurrency exchanges.
Earlier in January, South Korean regulators were mulling a bill that would ban cryptocurrency-trading activities completely in the world’s third largest market for such trades. The possibility of such a ban set Bitcoin prices tumbling to below the US$10,000 mark and less than half its peak value in December.
When asked to place Bitcoin on a risk scale of one to 10 – with 10 equivalent to the safety of buying gold – Mr Mohanty scoffed and said that Bitcoin “is not even a one because it is at a very experimental stage”.
“You can’t buy a simple coffee using a Bitcoin instantly in the way it is done today. Till you get that, let’s not even talk about any comparison with existing financial instruments,” he said.
BUT BLOCKCHAIN EXPERIMENTS MUST CONTINUE
While Mr Mohanty urged investors to exercise caution when buying cryptocurrencies like Bitcoin, he said that the underlying technology was still very much worth experimenting with.
“We should not lose the sight of the experimental value of cryptocurrency and the underlying technology. Regulators must support that piece of the experiment,” he said.
He pointed out that blockchain technology could make financial transactions like cross-border money transfer cheaper and safer by removing the need for a central authority to verify information and perform checks.
“We should not shut down a great idea because some speculators chose to speculate in the market in a way which is not appropriate,” he added.