No protection for customers who deal in cryptocurrencies, says MAS
Singapore. The Monetary Authority of Singapore released a statement on 21 November 2022 to address questions and misconceptions that arose due to the collapse of FTX.com.
The first misconception is that it was possible to protect customers, specifically local users, who deal with FTX by ring-fencing their assets. MAS cannot do this since FTX is not licensed by MAS and it operates offshore. MAS regularly warns people against dealing with unregulated entities.
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The next question is why MAS treated Binance differently from FTX, specifically why it was placed on the Investor Alert List, while FTX was not.
While both are not licensed in Singapore, there is a difference between the two: Binance actively solicits users in Singapore, while FTX was not.
MAS also received complaints about Binance between January and August 2021.
For FTX, there was no evidence that it solicited Singapore users. FTX trades also cannot be transacted in SGD.
MAS placed Binance on the Investor Alert List or IAL since it solicited Singapore users without a licence. There was no reason to place FTX here since there was no evidence it contravened the Payment Services Act.
MAS also required Binance to stop soliciting users in Singapore. This was made possible through various measures such as geo-blocking SG addresses.
The third question is if MAS should exhaustively list on the IAL and give information on all offshore crypto exchanges globally.
The purpose of IAL is to warn people of entities that are wrongly perceived as MAS regulated, especially those who solicit users without a MAS licence. It does not mean that other entities who operate offshore are safe to deal with.
In addition to maintaining the IAL, MAS also published the Financial Institutions Directory on its website. This is an exhaustive list of all MAS-regulated entities.
The most crucial lesson from the collapse of FTX is that dealing with cryptocurrency, on any platform, is dangerous.
It is possible for crypto exchanges to fail, even if they are licensed in Singapore. Keep in mind that the purpose of licensing would only be to regulate money-laundering risks, not to protect investors.
Additionally, even if crypto exchanges are well-managed, cryptocurrencies are still volatile.
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