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The Monetary Authority of Singapore (MAS) issued a statement yesterday (November 21) to address misconceptions with regards to the collapse of crypto exchange FTX. 

The collapse of FTX came as a shock to many, wiping out many investors. 

In the statement, MAS pointed out that “the most important lesson from the FTX debacle is that dealing in any cryptocurrency, on any platform, is hazardous”.

It added that it is not possible to protect local users who have dealt with FTX, since FTX was not registered and regulated in Singapore. 

MAS also addressed concerns of why Binance was placed on the Investor Alert List (IAL), while FTX was not. 

“While both Binance and FTX are not licensed here, there is a clear difference between the two: Binance was actively soliciting users in Singapore, while FTX was not. Binance in fact, went to the extent of offering listings in Singapore Dollars and accepted Singapore-specific payment modes such as PayNow and PayLah,” said MAS.

These actions by Binance were seen as a possible violation of the Payment Services Act, since Binance was not licensed in Singapore. 

In contrast, MAS argued that there was no evidence that FTX was specifically soliciting Singapore users. While Singaporeans can access both Binance and FTX online, FTX was not placed on the IAL because they were not specifically courting users from Singapore. 

MAS has also stressed that it is not possible to list all the exchanges that are not licensed in the IAL, since there are hundreds of such exchanges. 

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… Even if a crypto exchange is well-managed, cryptocurrencies themselves are highly volatile and many of them have lost all value.

– MAS

MAS also warned that even if a crypto exchange is licensed in Singapore, it would only be regulated to address money-laundering risks, and not to protect investors. 

FTX’s backers have marked their investments down to zero

Following the revelation that FTX founder Sam Bankman-Fried was using FTX’s token FTT as its capital, questions of FTX and Alameda’s solvency were raised.

When Binance announced that it was liquidating its remaining FTT, holders panicked and attempted to sell their own FTT holdings, which precipitated a crisis at FTX.

During this time, Fried attempted to save FTX by selling the company to Binance.

The deal has since fallen through, and in response, Sequoia Capital, one of FTX’s early investors, sent a letter to its own investors and notifying them that Sequoia had marked their investment down to $0.

Sequoia Capital’s letter to investors on its FTX investment
Sequoia Capital’s letter to investors on its FTX investment / Image Credit: Bloomberg

Last week, Temasek Holdings followed suit, announcing that it was writing off its entire investment in FTX, which amounted to US$275 million. Temasek had previously participated in two funding rounds for FTX, with on being a Series B funding round in October 2021 and the other being a Series C funding round in January 2022.

In a statement addressing this move, Temasek noted that “it is apparent from this investment that perhaps our belief in the actions, judgement and leadership of SBF, formed from our interactions with him and views expressed in our discussions with others, would appear to have been misplaced”.

The crypto winter claims another casualty

FTX is the latest in a string of bankruptcies and collapses within the cryptocurrency ecosystem. Beginning in May, many companies within the Web3 world have encountered crises, and some giants of the crypto spaces have not proved resolute enough to weather the storm. 

Terraform Labs, which launched the algorithmic stablecoin Terra alongside the collateral token Luna, saw the values of both tokens plummet overnight. 

The crash of the Luna tokens also brought down several other companies, including crypto lending platform Celsius, and hedge fund Three Arrows Capital.

Other companies, such as Crypto.com and Bybit, have also been forced to lay off some workers.

Featured Image Credit: Monetary Authority of Singapore

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