Even Licensed Crypto Exchanges Can Fail: Singapore Regulator Explains Action Against Binance vs. FTX

The central bank of Singapore, the Monetary Authority of Singapore (MAS), released a statement this week “to clarify some misunderstandings that have emerged following the FTX.com (FTX) incident.”

The central bank clarified: “A first misperception is that local consumers who interacted with FTX may be protected. Since FTX operates offshore and is not licensed by MAS, MAS is unable to do this.

The MAS then went on to explain why it chose to take action against Binance rather than FTX. The former was added on the Investor Alert List (IAL) of the central bank, whilst the latter was not. The regulatory body explained:

Even while neither Binance nor FTX have local licenses, there is a noticeable distinction between the two: Binance actively sought consumers in Singapore, whilst FTX did not.

In September of last year, the MAS issued a directive ordering Binance to stop offering payment services to Singaporeans. The cryptocurrency exchange discontinued its exchange services in the city-state a few months later.

The central bank emphasized that Binance “in fact went to the extent of offering listings in Singapore dollars and accepting Singapore-specific payment mechanisms like as Paynow and Paylah,” noting that between January and August 2021, it received multiple complaints regarding Binance. According to the MAS,

Due to Binance’s unauthorized solicitation of Singaporean users, MAS added Binance to the IAL. Additionally, upon MAS’ referral, the Commercial Affairs Department started looking into Binance for potential Payment Services Act violations (PS Act). Since there was no proof that FTX had broken the PS Act, there was no justification for listing it on the IAL.

The regulator made the following statement regarding FTX in particular: “There was no evidence that it was specifically courting Singapore users. Singapore dollars could not be used to make trades on FTX. However, Singaporeans were able to use FTX services online, just like thousands of other foreign financial and crypto companies.

According to a recent study, after Binance discontinued operations in Singapore, its consumers migrated to FTX. Before the exchange’s demise, more people from Singapore than any other nation—aside from South Korea—were accessing the FTX.com website.

The MAS cautioned: Dealing in any cryptocurrency, on any platform, is risky and investors “may lose all their money,” noting that this is “The most essential lesson from the FTX catastrophe.”

Crypto exchanges can and do go under. Even if a cryptocurrency exchange were granted a license in Singapore, it would still only be subject to regulation to address issues of money laundering and not to safeguard investors.

The MAS further stressed that “Cryptocurrencies themselves are highly volatile and many of them have lost all value… The continuous unrest in the cryptocurrency market serves as a reminder of the enormous risks involved in doing business with cryptocurrencies.

Temasek, a subsidiary of the Singaporean government, wrote off its $275 million investment in the cryptocurrency startup after FTX’s collapse. Singapore has been enforcing stringent regulations in an effort to lower risks for individual cryptocurrency investors.