‘Dealing in any cryptocurrency… is hazardous’, says MAS following FTX.com debacle

The Bahamas-based crypto exchange filed for bankruptcy on Nov 11 and is said to owe nearly US$3.1 billion to its top 50 creditors.

The Monetary Authority of Singapore (MAS) has issued a statement in the wake of the collapse of FTX.com to clarify some of the questions and misconceptions that arose since the debacle.

The Bahamas-based crypto exchange filed for bankruptcy in the US on Nov 11 and is said to owe nearly US$3.1 billion ($4.26 billion) to its top 50 creditors.

In its Nov 21 statement, MAS made three key points in response to the questions and misconceptions it received.

Not possible to protect local users from FTX.com: MAS

First, the central bank revealed that it was not possible to protect local users who dealt with FTX.com as the company was not licensed with MAS and operates offshore. “MAS has consistently warned about the dangers of dealing with unregulated entities,” the central bank stressed.

MAS, on Nov 14, clarified that FTX.com was “neither licensed nor exempted from licensing in Singapore”.

There was ‘clear difference’ between Binance.com and FTX.com on the former’s inclusion on the IAL

Next, MAS addressed the difference in its treatments between fellow crypto exchange, Binance.com, and FTX.com, and why the former was placed on the Investor Alert List (IAL) while the latter was not.

To the central bank, there was a “clear difference” between both exchanges.

While both Binance.com and FTX.com are not licensed here, there is a clear difference between the two: Binance.com was actively soliciting users in Singapore while FTX was not. Binance.com in fact went to the extent of offering listings in Singapore dollars and accepted Singapore-specific payment modes such as PayNow and PayLah,” reads the statement put out by MAS on Nov 21.

In addition, MAS had received several complaints about Binance.com between January 2021 and August 2021. There were also announcements in several countries including Italy, Japan, Malaysia, the UK and Thailand regarding the unlicensed solicitation of customers by Binance.com during that period.

In comparison, there was no evidence that FTX.com was soliciting Singapore users specifically, says MAS. Trades made on FTX.com could not be transacted in Singapore dollars (SGD) as well, although users in Singapore were able to access FTX.com’s services online.

Further to its statement, MAS explained that Binance.com was put on the IAL as it had solicited users in Singapore without a licence. On MAS’s referral, the Commercial Affairs Department (CAD) begun investigations into Binance.com for the possible contravention of the Payment Services Act (PS Act).

Not possible to list all crypto exchanges on IAL

On the question of providing an exhaustive list on the IAL and providing information on all the offshore crypto exchanges in the world, the MAS says it is not possible to do so for the “hundreds of such exchanges and thousands of other entities offshore”. It adds that no regulator in the world has done so.

The central bank, instead, noted that 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,” says the central bank.

That said, users looking to refer to all MAS-regulated entities should refer to the Financial Institutions Directory, which keeps an exhaustive list of such entities.

Summing up its statement, the MAS reiterated the lesson that “dealing in any cryptocurrency, on any platform, is hazardous”.

“Crypto exchanges can and do fail. Even if a crypto exchange is licensed in Singapore, it would be currently only regulated to address money-laundering risks, not to protect investors,” says MAS.

“This is similar to the approach currently taken in most jurisdictions. MAS has recently published a consultation paper proposing basic investor protection measures for crypto players who are licensed to operate in Singapore,” it adds.

Finally, MAS stressed that cryptocurrencies are volatile, noting that many of them have lost all value as at the time of writing.

“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,” says the central bank.

See also: Singapore regulator warns crypto firms to curb their enthusiasm and Retail investors should steer clear of cryptocurrencies, warns DPM Heng Swee Keat at the Asia Tech X Singapore Summit

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