FTX collapse: ‘Very limited’ impact on Singapore’s financial system and economy, says DPM Wong

Key financial institutions in Singapore have “insignificant” exposures to cryptocurrency and players in the industry, says Deputy Prime Minister Lawrence Wong.

FTX collapse: ‘Very limited’ impact on Singapore’s financial system and economy, says DPM Wong
The logo of cryptocurrency exchange FTX. (Photo: AFP/Stefani Reynolds)

SINGAPORE: The collapse of cryptocurrency exchange FTX will have a “very limited” spillover impact on Singapore’s broader financial system and economy, Deputy Prime Minister Lawrence Wong said in Parliament on Wednesday (Nov 30).

Key financial institutions in the country have “insignificant” exposures to cryptocurrency and players in the industry, he added, citing surveillance by the Monetary Authority of Singapore (MAS).

Mr Wong, who is also Finance Minister, also noted that authorities do not have the number of Singapore retail investors on FTX, as the platform is not licensed here and does not operate in Singapore.

“Unfortunately, those who invested in cryptocurrencies through FTX’s global platform would have lost money,” he said.

Moving forward, MAS plans to introduce basic investor protection measures, such as administering a risk awareness test for retail customers. The financial regulator published a consultation paper on that last month, and will finalise these proposals after receiving industry and public feedback, Mr Wong said.

The minister was responding to a raft of parliamentary questions over the spectacular collapse of FTX.

The crypto exchange filed for US bankruptcy protection on Nov 11, leaving possibly more than 1 million customers and investors facing losses in the billions of dollars. The fall of an industry darling has fanned fears about the future of the crypto industry, as crypto prices plummet and more firms brace for a fallout.

Crypto lender BlockFi, for one, filed for bankruptcy on Monday, citing a liquidity crisis caused by “substantial exposure” to FTX.

Mr Wong said the collapse of FTX and other major crypto platforms should bring about “much-needed rationalisation” in the cryptocurrency space.

“The repercussions on the cryptocurrency ecosystem globally are still unfolding, and we are watching this,” he told the House.

At the moment, financial institutions providing cryptocurrency services in Singapore, also known as digital payment token (DPT) service providers, are regulated by MAS on money laundering, terrorist financing and technology risks.

They are, however, not regulated for safety and soundness or investor protection, said Mr Wong, who added that this is “the prevailing approach in most jurisdictions”.

“MAS has been consistently warning since 2017 that dealing in cryptocurrencies is hazardous and recent events have underscored these hazards,” he said.

Mr Wong also reiterated that MAS did not have a reason to list FTX on its investor alert list as there was no evidence the platform was soliciting users in Singapore.

This is unlike another crypto exchange Binance, which was placed on the investor alert list for actively soliciting users in Singapore without a valid licence, and is being investigated for possible violation of the Payment Services Act.

“This does not mean that all entities which are not listed on the (investor alert list) are safe to deal with. MAS cannot possibly provide an exhaustive list of all the unsafe or unlicensed entities that exist in the world,” the minister said.

While authorities also have plans to implement appropriate regulatory measures to protect retail investors, Mr Wong stressed that MAS “will not be able to prevent DPT service providers from failing, or customers from suffering losses”.

“Cryptocurrency platforms can collapse due to fraud, unsustainable business models, or excessive risk-taking. FTX is not the first cryptocurrency platform to collapse, nor will it be the last,” he said.

“Further, even if a cryptocurrency platform is well-managed, cryptocurrencies themselves, as I mentioned earlier, are highly volatile and have no intrinsic value,” Mr Wong added.

“Those who trade in cryptocurrencies must be prepared to lose all their value. No amount of regulation can remove this risk.”

Source: CNA/sk(gs)