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The Monetary Authority of Singapore (MAS) said yesterday that it was not possible to protect local investors who used embattled crypto exchange FTX as the exchange was not licensed in Singapore and operated offshore.
In a statement addressing the “questions and misconceptions” that have arisen in the wake of the FTX collapse, the MAS clarified that Binance was treated differently from FTX (why Binance was placed on the Investor Alert List (IAL) while FTX was not) because the former was actively soliciting users without a license, and also offered listings in Singapore dollars and accepted Singapore-specific payment modes such as PayNow and PayLah.
MAS also noted that they received “several complaints” about Binance between January and August 2021, and that there were also announcements in multiple of unlicensed solicitation of customers by Binance during the same period. On MAS’ referral, the Commercial Affairs Department also commenced investigation into Binance for possible contravention of the Payment Services Act (PS Act).
However, while Singapore users could still access FTX services online, there was “no evidence” that FTX was soliciting Singapore user specifically as trades on FTX could not be executed with Singapore dollars, which is why FTX was not placed on the IAL.
Last week, the MAS clarified that Binance was not actually banned from operating in Singapore, after questions were raised as to whether “banning” Binance and placing it on the Investor Alert List (IAL) have led Singapore users to invest through FTX.com.
Whether or not “banned” is the correct term is hardly the matter at hand, but what happened was that Binance had to effectively cease its exchange services in Singapore by geo-blocking Singapore IP addresses and removing its mobile application from Singapore app stores, as confirmed by the MAS.
On whether the MAS should “exhaustively list” on the investor alert list and provide information on all offshore crypto exchanges in the world, it said that there are “hundreds of such exchanges and thousands of other entities offshore that accept investments in non-crypto assets, and that it would not be possible to list all of them”. MAS added that no regulator in the world has done so.
The biggest questions remain unaddressed
MAS highlighted that the “most important lesson from the FTX debacle is that dealing in any cryptocurrency, on any platform, is hazardous”, and that crypto exchanges “can and do fail”. It also said that even if a crypto exchange is “well-managed”, cryptocurrencies themselves are highly volatile with many having lost all value.
Singapore’s Ministry of Finance states that the “Government establishes the overall investment mandates and objectives of GIC, MAS and Temasek”. It also “systematically reviews the overall risks of its whole portfolio of assets invested by the three entities”.
It is no secret that the MAS has consistently the general public that investing in cryptocurrencies is risky business – something that the MAS never fails to mention in their recent press releases. However, if the mandate and the objective of the MAS is that cryptocurrencies are hazardous and retail investors should be protected, then why are government reserves being used to invest in a platform that deals cryptocurrencies to retail investors? Or is that not as “hazardous”?
Temasek’s US$275 million investment into FTX has since been written down, with the sovereign fund effectively losing hundreds of millions in dollars of government reserves.
Yes, it can be argued that Temasek invested in a platform that supposedly is not accessible to the Singapore users that the MAS so desperately wants to protect. But retail investors, who, let’s face it, just can’t be completely restricted from something that can potentially offer sky-high returns, would naturally think that a US$275 million investment by their sovereign fund indicates a higher degree of reliability and trustworthiness.
“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,” concluded the MAS.
Perhaps it’s time for these entities to align their “mandates and objectives” and actually heed their own advice.