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‘Dealing in any cryptocurrency, on any platform, is hazardous’ — MAS says in wake of FTX collapse

"It does not mean that the thousands of other entities operating offshore, which are not listed on the IAL (Investor Alert List), are safe to deal with,” MAS added.

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Singapore’s central bank, the Monetary Authority of Singapore (MAS), issued a statement on Monday (Nov 21) to answer questions and address misconceptions stemming from the recent collapse of cryptocurrency exchange giant FTX.

FTX, once the third-largest crypto exchange in the world, filed for bankruptcy in the United States on Nov 11. It’s possible that its estimated one million customers and investors—including Temasek Holdings, owned by the government of Singapore— stand to lose everything. FTX’s failure is one of the highest-profile crypto blowups so far.

“The most important lesson from the FTX debacle is that dealing in any cryptocurrency, on any platform, is hazardous,” MAS said in its statement, adding that it “has consistently warned about the dangers of dealing with unregulated entities.”

Among the clarifications MAS made on Nov 21 are the following:

A first misconception is that it was possible to protect local users who dealt with FTX, such as by ringfencing their assets or ensuring that FTX backed its assets with reserves. MAS cannot do this as FTX is not licensed by MAS and operates offshore.”

Secondly, the statement underlined the difference between Binance and FTX, explaining why the former had been put on the Investor Alert List (IAL) while FTX was not. Neither company is licensed in Singapore, but “Binance was actively soliciting users in Singapore,” unlike FTX MAS said, adding that it had received multiple complaints regarding Binance between January and August last year.

However, as for FTX, “there was no evidence that it was soliciting Singapore users specifically. Trades on FTX also could not be transacted in Singapore dollars,” MAS said. An investigation into Binance was started by the Commercial Affairs Department for possible contravention of the Payment Services Act (PS Act).

There was no evidence that FTX had contravened the act, and no such investigation against it was commenced. Binance has since been required by MAS to stop soliciting Singapore users. MAS added that it would not be possible to provide information on all the offshore crypto exchanges in the world, due to their sheer number.

“The purpose of the IAL is to warn the public of entities that may be wrongly perceived as being MAS-regulated, especially those which solicit Singapore customers for financial business without the requisite MAS licence. It does not mean that the thousands of other entities operating offshore, which are not listed on the IAL, are safe to deal with,” MAS added.

The authority went on to warn that cryptocurrency exchanges can and do fail and that the cryptocurrencies themselves are highly volatile, with many of them having lost all value. “The ongoing turmoil in the crypto industry serves as a reminder of the huge risks of dealing in cryptocurrencies. As MAS has repeatedly stated, there is no protection for customers who deal in cryptocurrencies. They can lose all their money.”

As for Temasek Holdings, it issued a statement on Nov 17 saying it will be writing down its investment in FTX worth US$275 million (S$377 million) regardless of the outcome of the firm’s bankruptcy protection filing. “The cost of our investment in FTX was 0.09% of our net portfolio value of S$403 billion as of 31 March 2022.

There have been misperceptions that our investment in FTX is an investment into cryptocurrencies. To clarify, we currently have no direct exposure in cryptocurrencies,” Temasek said. /TISG

FTX owes its biggest creditors over S$4 billion 

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