Earlier this month, cryptocurrency exchange firm FTX collapsed, much to the shock of the industry.
A week later, Temasek announced their decision to write down their full investment of S$377 million in the company.
The Monetary Authority of Singapore (MAS) has now addressed the situation as well. Answering burning questions in the wake of the debacle, they have emphasised the risks of trading in cryptocurrency.
In a statement on 21 Nov, MAS answered several queries from the public following the FTX crisis.
They explained that it was not possible to protect local users dealing in FTX by ringfencing their assets or ensuring FTX backed its assets with reserves.
This is because FTX operates offshore and is not MAS-licensed.
“MAS has consistently warned about the dangers of dealing with unregulated entities,” they said.
The authority had also received concerns on whether they should exhaustively list and provide information on all offshore crypto exchanges on the Investor Alert List (IAL).
This, too, is impossible, as there are an immense number of such exchanges. In addition, “thousands” of other offshore entities accepting investments in non-crypto assets exist.
“It is not possible to list all of them and no regulator in the world has done so,” MAS noted.
The IAL’s purpose is to warn the public of entities which are not regulated by MAS despite appearing as such.
This is especially important for those that solicit Singapore users for financial business without the proper MAS licence.
The authority added:
It does not mean that the thousands of other entities operating offshore, which are not listed on the IAL, are safe to deal with.
Besides the IAL, MAS has also published a Financial Institutions Directory on its website. It contains an exhaustive list of all MAS-regulated entities.
In addition, MAS explained why they placed Binance on the IAL but didn’t do the same for FTX.
Neither Binance nor FTX has a licence in Singapore. However, Binance was actively soliciting local users, in contrast to FTX.
The firm had even offered listings in Singapore dollars, accepting payment through local methods such as PayNow and PayLah, MAS reasoned.
Furthermore, the authority allegedly received several complaints about Binance from January to August 2021. During the same period, Binance conducted unlicensed solicitations of customers in multiple jurisdictions.
As such, MAS placed Binance on the IAL for soliciting Singapore users without a licence.
Upon their referral, the Commercial Affairs Department investigated Binance for possibly contravening the Payment Services Act (PS Act).
As for FTX, there was no evidence of the firm soliciting local users specifically or contravening the PS Act. Transactions on the platform could not take place in Singapore dollars as well.
Despite this, multiple users from Singapore could access their services online.
MAS concluded its statement by warning of the dangers of dealing with any cryptocurrency.
Even for those licensed in Singapore, MAS can only regulate crypto exchanges to address money-laundering risks. They are unable to protect investors, an approach similar to the one in most jurisdictions.
Even if a crypto exchange is well-managed, the currencies themselves are highly volatile. Many of them have lost value as well.
“The ongoing turmoil in the crypto industry serves as a reminder of the huge risks of dealing in cryptocurrencies,” MAS said. “There is no protection for customers who deal in cryptocurrencies. They can lose all their money.”
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