FTX.com not required to migrate S’pore users to local subsidiary Quoine: MAS
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The FTX saga has raised several issues, the key of which was why Singapore users and their assets are not parked under Quoine.
PHOTO: AFP
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SINGAPORE - The funds of Singapore investors in bankrupt cryptocurrency exchange FTX.com are not parked under its local subsidiary Quoine Pte Ltd as the two are separate legal entities, said the Monetary Authority of Singapore (MAS).
“Singapore users have the choice to deal with either FTX.com or Quoine. MAS has not required FTX.com to migrate Singapore users to Quoine,” the regulator said on Monday.
It was responding to media queries following a commentary in The Straits Times that raised the issue of why Singapore users of FTX.com – which has filed for protection from bankruptcy – were not parked under its local subsidiary.
Some observers had argued that had the funds been parked under Quoine, they would not have been stuck when FTX.com faced a liquidity crunch.
Instead, local subsidiaries of FTX.com, like the one in Japan, would have collateral assets to back their local obligations.
Investors in Singapore currently stand to get burned as FTX, once a darling of the crypto world, has fallen owing to a lack of liquidity.
On Monday, MAS explained the legal situation surrounding FTX.com and its subsidiary.
It said FTX.com is not licensed to operate in Singapore and that it is “not possible” to stop Singapore users from directly accessing overseas service providers.
“FTX.com was therefore able to onboard Singapore users. MAS has consistently reminded the public of the risks of dealing with unlicensed entities,” the regulator said.
On the other hand, Quoine, which was acquired by FTX in April, was granted an exemption from holding a licence under Singapore’s Payment Services Act. This meant that it was able to onboard Singapore users while MAS processed its licence application. The company was to be renamed FTX Singapore if it received the licence.
On Monday, the regulator said that taking into account recent developments, it is carefully reviewing Quoine’s licence application.
FTX’s filing last Friday showed that there were over 100,000 creditors and tens of billions in assets and liabilities, according to The Wall Street Journal.
Many Singapore users of FTX.com caught in the shocking collapse said they previously had to move their funds from rival player Binance to FTX.com after Binance was stopped from onboarding customers from Singapore and placed on the Investor Alert List (IAL) in September 2021.
Binance was launched in July 2017, while FTX.com was set up in May 2019.
MAS said on Monday that Binance was not banned from operating in Singapore.
The crypto exchange did not have the requisite licence to solicit customers from Singapore and had to cease doing so, it said, adding that putting a firm on the list is meant to prevent people from wrongly perceiving that the firm is regulated by MAS.
This was the case for Binance.com, it said. “It would not be meaningful for MAS to list all unlicensed entities on the IAL. MAS did not have cause to list FTX on the same basis as Binance.”
Digital payment token service providers licensed by MAS under the Payment Services Act are regulated for money laundering and terrorism financing risks as well as technology risks, but not safety and soundness, the regulator said.
Similar to the situation in other jurisdictions, the firms are not, for now, subject to risk-based capital or liquidity requirements, nor are they required to safeguard customer monies or digital tokens from insolvency risk, it noted.
“It is also why MAS has been continually reminding the general public since 2017 that dealing in cryptocurrency is highly hazardous,” added the regulator.
MAS had issued a consultation paper on Oct 26 proposing regulatory measures to reduce risks to consumers from cryptocurrency trading.
The proposals include ringfencing Singapore retail investors’ assets from a crypto firm’s overall assets, and forbidding players from lending out retail investors’ digital payment tokens – practices that are common in the industry.
MAS said: “Notwithstanding these measures, consumers must continue to exercise utmost caution when trading in cryptocurrency. Regulations cannot protect consumers from losses arising from the inherently speculative and highly risky nature of cryptocurrency trading.”
