Cryptocurrency exchange Binance was investigated by Singapore’s Commercial Affairs Department (CAD), following several complaints between January and August 2021. Subsequently, it was placed on the city-state’s Investor Alert List (IAL), the Monetary Authority of Singapore (MAS) said in a statement on Monday.
The statement was issued in response to the “questions and misconceptions that have arisen in the wake of the FTX.com debacle”.
Crypto bourse FTX filed for bankruptcy in the US earlier this month after a liquidity crunch that wiped out billions of dollars from the worth of investors. Some 5% of the online traffic on FTX.com had come from Singapore in October, show data from analytics platform SimilarWeb.
While both Binance and FTX are not licensed in the city-state, Singapore’s central bank stressed that there there is a clear difference between the two. For one, Binance was actively soliciting users in Singapore while FTX was not. Additionally, Binance had gone to the extent of offering listings in Singapore dollars and accepted Singapore-specific payment modes such as PayNow and PayLah.
However, the cryptocurrency platform was placed on the IAL “because it had solicited Singapore users without a licence,” MAS stated, adding that the investigations into the company were done “for possible contravention of the Payment Services Act (PS Act)”.
The IAL serves 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, MAS said. This does not mean that entities not listed on the IAL are safe to deal with, the agency said.
Conversely, FTX was not placed on the alert list as there was no evidence of the company soliciting users in Singapore and it did not offer trades in Singapore dollars.
However, Singapore users were still able to access online FTX services. The regulator said it was not possible to ringfence the assets that Singapore investors choose to put up with FTX, nor ensure that the company backed its assets with reserves. “MAS cannot do this as FTX is not licensed by MAS and operates offshore,” the regulator said.
Additionally, the central bank would also not have been able to protect investors’ assets even if they had parked them under Quoine, the operator of the Liquid exchange in Singapore. The subsidiary, as with all of FTX’s overseas units, has been included in the US bankruptcy proceedings and has halted withdrawals.
Quoine was only acquired as part of the Liquid group acquisition by FTX in March 2022.
Addressing industry talks on whether MAS should exhaustively list on the IAL and provide information on all offshore crypto exchanges in the world, the regulator responded: “There are hundreds of such exchanges, and thousands of other entities offshore that accept investments in non-crypto assets. It is not possible to list all of them and no regulator in the world has done so”.
Despite the current restrictions, Binance has not been “banned” from operating in Singapore. In fact, the group is able to continue carrying out other unregulated activities in Singapore, such as corporate functions and blockchain technology services.
Binance Asia continued to provide services to Singapore users as an exempt payment service provider while its application for a PS Act licence was being reviewed by MAS. It has since withdrawn its licence application but continues to carry out unregulated activities in Singapore, MAS noted.
The regulator warned 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,” MAS said.
Furthermore, investors may still lose money even if they invest with a well-managed exchange, as “cryptocurrencies themselves are highly volatile and many of them have lost all value”.
“As MAS has repeatedly stated, there is no protection for customers who deal in cryptocurrencies. They can lose all their money,” said MAS.