Singapore’s Crypto Ambitions Shaken by FTX Collapse

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Singapore was considered “crypto friendly” until recently

There was a time when it looked like Singapore would become a global center for cryptocurrency.

Authorities had signaled early interest in exploiting blockchain technology. This, coupled with the city-state’s favorable business environment, has attracted digital asset companies and a burgeoning investor community.

In 2021, investment in industry in Singapore increased tenfold from the previous year to $1.48 billion ($1.2 billion), according to KPMG, accounting for nearly half of the total investment. Asia-Pacific for the year.

2022 couldn’t have been more different.

Crypto assets and businesses – many with ties to Singapore – have imploded, causing repercussions and causing losses around the world.

First, a popular token called Terra Luna crashed, causing its sister token TerraUSD, which was largely stable, to fall.

A few months later, Singapore-based crypto hedge fund Three Arrows filed for bankruptcy, deleting crypto exchange Voyager Digital along with it. In August, crypto lender Hodlnaut became the next in a growing line of victims.

The shutdowns of key market players this year are believed to have wiped out $1.5 trillion in crypto market capitalization.

Then, in November, billions were lost within days, when US crypto exchange FTX crashed dramatically due to a crippling liquidity crunch. FTX founder Sam Bankman-Fried has since been accused by US authorities of “one of the biggest financial frauds in US history”.

For Singapore, the collapse of FTX was particularly shocking. His public investment fund Temasek had invested in the stock market, injecting $275 million over several months.

Temasek says he will write the money and conduct an internal review of the investment.

The fund is worth over $295 billion and thus the FTX investment represents a small percentage of its public wealth portfolio.

The story continues

But Singapore’s deputy prime minister, who is also finance minister, told parliament the loss had damaged his reputation.

“The fact that other top global institutional investors like BlackRock and Sequoia Capital have also invested in FTX doesn’t mitigate that,” Lawrence Wong said.

Lawrence Wong is Minister of Finance and Deputy Prime Minister of Singapore

End investors have also been affected, and many believe Singaporean authorities should have done more.

Nicole Yap, 26, says she didn’t hesitate to invest in the stock market because so many big companies backed her. She lost around $150,000 ($122,000), but feels that the blame shouldn’t lie entirely with the user.

“You need the regulation – the government or the Securities and Exchange Commission (SEC) – to say, ‘these companies are good, we’ve seen their books,'” Ms Yap says.

“Just because there are a lot of scams in crypto doesn’t mean crypto is a scam. But users don’t have a platform to find out about these things. We only have social media and crypto influencers.”

Carol Lim started investing in cryptocurrency during the pandemic. The 52-year-old hoped to earn enough money to retire in the next few years.

“I invested with Hodlenaut because the Monetary Authority of Singapore (MAS) approved it. In today’s value I lost around $55,000. I can only hope to get some of that back .”

Hodlenaut was one of the few companies to have been granted approval in principle to provide digital payment services by the central bank of Singapore. The license approval was rescinded when the lender was forced to stop withdrawals due to market conditions.

“The crux of the matter is that there is some misunderstanding among regulators. They want to bring businesses into their jurisdiction, but you have to regulate in a way that consumers are safe,” says Michael Gronager, CEO and co. -founder of blockchain. Chainalysis analysis firm.

Mr Gronager says that because consumers are so global these days, regulators must decide whether to implement laws on the business – for example, giving them a license to operate in the country – or restrict the commercial access to retail investors.

FTX did not have a license to operate in Singapore. However, MAS said it was not possible to prevent local users from accessing foreign service providers.

“We’ll see fraud, quick money in the industry – it’s no surprise. We see it on the internet, we see it in all kinds of traditional industries,” Mr Gronager said.

Singapore had started introducing new measures even before the FTX saga, warning that the technology can be volatile and speculative. It banned crypto advertising earlier this year and is investigating a number of outlets in the island nation.

Tom Brady and Gisele Bundchen were angel investors in FTX with several Singaporean funds

Binance, the world’s largest crypto exchange, left Singapore last year after being put on an investor alert list for soliciting customers without the required license and offering Singapore dollar trades.

The crackdown has drawn criticism from industry players, for example Brian Armstrong, co-founder and CEO of US-based crypto exchange platform Coinbase.

“Singapore wants to be a hub for Web3 (a vision of the next iteration of the internet that uses blockchains and cryptocurrencies) and then simultaneously says, ‘Oh, we’re not really going to allow retail or self-hosted wallets to be available,” he said at the Singapore FinTech Festival in November.

“These two things are incompatible in my mind,” he added.

The Singapore government says it remains enthusiastic about crypto and still wants to become a virtual asset hub, with a focus on the business and administrative side of blockchain technology.

He pledged to contain risk, offering knowledge tests to retail investors before they are allowed to trade, and acknowledged that this could mean retail-focused companies could move to new markets. other jurisdictions.

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

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

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