Singapore’s central bank emphasizes the risks of cryptocurrency trading and clarifies misconceptions following the high-profile failure of FTX.
Singapore’s central bank, the Monetary Authority of Singapore (MAS), released a statement on Monday (Nov 21) to address questions and misconceptions following the recent collapse of cryptocurrency exchange giant FTX. Once the third-largest crypto exchange globally, FTX filed for bankruptcy in the United States on Nov 11, potentially leaving its estimated one million customers—including Temasek Holdings, owned by the Singapore government—facing total losses. This incident is regarded as one of the most significant failures in the crypto industry to date.
In its statement, MAS highlighted the critical lesson from the FTX debacle: “Dealing in any cryptocurrency, on any platform, is hazardous.” The authority reiterated its ongoing warnings regarding the risks associated with unregulated entities in the crypto space.
Among the clarifications made by MAS on Nov 21 were several key points:
Protection of Local Users: MAS clarified that it could not protect local users dealing with FTX, such as by ringfencing their assets or ensuring that FTX backed its assets with reserves. This is because FTX is not licensed by MAS and operates offshore.
Distinction Between Binance and FTX: MAS explained the differences between Binance and FTX, noting that while both companies lack licenses in Singapore, “Binance was actively soliciting users in Singapore,” whereas there was no evidence that FTX had targeted Singaporean users specifically. FTX transactions could not be conducted in Singapore dollars. MAS previously initiated an investigation into Binance for potential violations of the Payment Services Act (PS Act).
Investor Alert List (IAL): MAS stated that the purpose of the IAL is to warn the public about entities that may be mistaken for MAS-regulated firms, particularly those soliciting Singapore customers without the required MAS license. The existence of many offshore crypto exchanges not listed on the IAL does not imply that they are safe for trading.
MAS cautioned that cryptocurrency exchanges can fail and that cryptocurrencies are highly volatile, with many having lost all value. “The ongoing turmoil in the crypto industry serves as a reminder of the substantial risks involved in cryptocurrency trading. As MAS has consistently stated, there is no protection for customers dealing in cryptocurrencies; they can lose all their money,” the statement added.
On Nov 17, Temasek Holdings announced it would write down its US$275 million (S$377 million) investment in FTX, regardless of the outcome of the firm’s bankruptcy proceedings. Temasek clarified that its investment constituted only 0.09% of its net portfolio value of S$403 billion as of March 31, 2022, emphasizing that it currently has no direct exposure to cryptocurrencies.
