MAS confirms that FTX’s subsidiary Quoine included in US bankruptcy proceedings
The Monetary Authority of Singapore (MAS) today addressed some questions and misconceptions that have arisen in the wake of the FTX debacle.
As FNG has reported, FTX Trading and a number of its subsidiaries filed for Chapter 11 bankruptcy in the United States on November 11, 2022.
The Singaporean regulator notes that one of the misconceptions is that if Singapore investors’ assets in FTX had been parked in Quoine Pte Ltd, an FTX local subsidiary, they would have been protected. This is not so. Quoine, like other overseas subsidiaries of FTX, has been included in the US bankruptcy proceedings and has halted withdrawals.
It was also a misconception 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.
With regard to FTX, there was no evidence that it was soliciting Singapore users specifically. Trades on FTX also could not be transacted in Singapore dollars. But as in the case of thousands of other financial and crypto entities that operate overseas, Singapore users were able to access FTX services online.
The most important lesson from the FTX debacle is that dealing in any cryptocurrency, on any platform, is hazardous, the regulator says.
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.
Further, even if a crypto exchange is well-managed, cryptocurrencies themselves are highly volatile and many of them have lost all value.
The ongoing turmoil in the crypto industry serves as a reminder of the huge risks of dealing in cryptocurrencies. As MAS has repeatedly stated, there is no protection for customers who deal in cryptocurrencies. They can lose all their money.