'Ongoing turmoil in cryptos a reminder of huge risks attached'

SINGAPORE: The ongoing turmoil in the crypto industry serves as a reminder of the huge risks in dealing in cryptocurrencies and the Monetary Authority of Singapore said it has repeatedly stated there is no protection for customers who deal in such assets and may lose all their money.

The Singaporean central bank put out a statement on Monday to address misconceptions in the wake of the recent collapse of crypto service provider FTX.

On November 11, crypto exchange FTX Trading and approximately 130 additional affiliated companies filed for Chapter 11 bankruptcy protection in the US to begin an "orderly process" to review and monetize assets for the benefit of all global stakeholders. Earlier too, a few other major crypto companies filed insolvency.

The first misconception, the Singaporean central bank in the statement said, is that it was possible to protect local users who dealt with FTX, such as by ringfencing their assets or ensuring that FTX backed its assets with reserves.

"MAS cannot do this as FTX is not licensed by MAS and operates offshore. MAS has consistently warned about the dangers of dealing with unregulated entities," it said.

The Singaporean central bank, in the statement, added, the most important lesson from the FTX debacle is 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. 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 added.

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