Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
Former chief executive of FTX Samuel Bankman-Fried is seen in the logo of his now bankrupt company. Photo: AFP/File

‘Not open to crypto speculation at all’: FTX meltdown puts focus on Singapore’s digital asset stance

  • FTX meltdown likely to spur the need for governments – in Singapore and elsewhere – to step up plans to regulate the cryptocurrency space
  • Some Singapore youth say they were convinced FTX was safe; authorities say they have long warned that cryptocurrencies are unsuitable investments for the retail public
Jacob* was immediately intrigued with cryptocurrencies and digital assets when he first heard about them as a teen, but only found time to learn how to trade during lockdown in 2020.

He quickly built up a decent sum, mostly using Binance – the world’s largest cryptocurrency exchange. But government regulations introduced last year limited the services Binance could offer Singaporeans, so the 26-year-old decided to shift his money to another exchange, FTX, a platform with around one million users.

On November 8, he noticed that something was wrong as major institutions began unloading their holdings of FTT – native cryptocurrency tokens used on FTX.

But management trainee Jacob was unable to withdraw all his S$50,000 ( US$36,000) before FTX collapsed and filed for bankruptcy.

“I happened to have my money in the wrong place at the wrong time,” he said. Imagine having S$50,000 in [a bank] and then suddenly you don’t any more, not because you bought the wrong stocks, but simply because you left your money in there.”

Last week, in mere hours, he lost almost his entire savings when FTX saw a huge sell-off triggered by a tweet by rival Binance’s CEO Changpeng Zhao, announcing the firm had decided to dump all its FTT holdings.

The tweet sparked an investor exodus from both the token and the exchange. An FTT worth US$78 in September 2021 fell to around US$24 before the tweet, and less than US$2 this week.

Jacob – who spoke to This Week in Asia on condition of anonymity – as well other Singaporean youth interviewed by media outlets like Tech in Asia said they thought FTX was reliable because it had the investment backing of the likes of Singaporean state investor Temasek, Sequoia Capital and Japan’s Softbank.

These investors – among the most respected in the world – had put money on FTX.

Singapore’s Temasek, majority owner of the nation’s top corporate brands such as Singapore Airlines and Singtel, on Thursday said it was writing down its US$275 million investment in FTX, reasoning it had “misplaced” its belief in founder Sam Bankman-Fried.

The investment amounted to 0.09 per cent of its net portfolio of S$403 billion (US$293.4 billion) as of March 31.

‘One big signal’ misperceived

In local crypto circles, some have questioned if local authorities could have done more to insulate Singapore investors from FTX’s collapse.

Officials have pointed out that the government has long warned about the risks inherent in cryptocurrency investment. “We are open to digital innovation and digital asset innovation, but we are not open to crypto speculation at all,” Deputy Prime Minister Lawrence Wong said at the Bloomberg New Economy Forum on Thursday.

As far back as 2017, the central bank, the Monetary Authority of Singapore (MAS), has consistently warned that cryptocurrencies are not suitable investments for the retail public.

In September 2021, MAS placed Binance on its Investor Alert List (IAL) to warn investors the firm did not possess a local license. The IAL warns consumers that entities on it are not regulated or licensed to provide payment services in Singapore. The MAS also blocked Binance from providing payment services, leading the company to terminate its Singapore operations.

Former FTX CEO faces grilling by lawmakers he backed

Reports have said numerous investors, like Jacob, switched to FTX at this point, thinking it was safe because authorities had not placed the platform in the same category as Binance.

MAS sought to set the record straight this week, noting that Binance was never banned from operating in the country. It also said it had no cause to add FTX to its IAL, adding that it was not possible to prevent Singapore users from directly accessing overseas service providers.

While entities are included in the IAL if they “may be wrongly perceived as being regulated by MAS”, the central bank said it was not meaningful to include all unlicensed entities.

Jacob told This Week in Asia he understood that “investments carry risk and it’s honestly not up to the authorities to bear those risks when things go awry.”

But, he added, “what investors look out for, however, are signals that the government and its related corporations give out. Effectively cutting off Singaporeans’ access to Binance and investing a large chunk in FTX via Temasek is one big signal”.

Experts who spoke to This Week In Asia said the FTX meltdown was likely to bring into focus the need for governments – in Singapore and elsewhere – to step up plans to regulate the cryptocurrency space. MAS in October unveiled a proposal to reduce risk to consumers in this regard.

Shaun Leong, a partner in the international arbitration and litigation team at law firm Withers KhattarWong, said it was “reasonable” that some investors considered that Binance was banned in Singapore, given authorities ordered it to stop providing payment services to Singapore residents since it did not have a licence to solicit customers.

Woo Jun Jie, senior research fellow at the Institute of Policy Studies at the National University of Singapore, said: “Binance was placed on the IAL as it had been wrongfully perceived to be regulated by MAS and hence permitted to solicit customers.

“The confusion came about because there is no way to stop a crypto platform from onboarding investors from anywhere in the world, and it would hence not be meaningful to have a list of platforms that are ‘not regulated’.”
Investors must conduct due diligence on whether the exchange is regulated in a reputable jurisdiction before deciding to trade on the platform
Nizam Ismail, consultant

Nizam Ismail, founder of Singapore-based compliance consultancy Ethikom Consultancy, said complaints from investors that they had no option but to invest with FTX were inaccurate, and said MAS issued warnings on dealing with unlicensed exchanges.

“Investors must conduct due diligence on whether the exchange is regulated in a reputable jurisdiction before deciding to trade on the platform,” he said.

Nevertheless, the saga highlighted the “obvious regulatory gaps” in the cryptocurrency market, Nizam said.

Ismail said the space remains “borderless” although regulations are “local”, making it challenging to make measures to police areas like consumer asset segregation or disclosures to consumers.

Woo, who researches cryptocurrency regulation, said authorities could consider introducing a “risk-based approach to categorising cryptocurrency platforms” to tell investors about the degree of risk when investing in a particular platform.

Crypto war: Sam Bankman-Fried’s feud with Changpeng Zhao explained

Recourse for investors?

Is there any recourse for investors moving forward? Perhaps, although the process is likely to be long and arduous.

Mike Chiam, a partner at PDLegal LLC, a commercial law practice with expertise in cryptocurrency matters, said investors can review the background and circumstances of how they deposited their digital deposits on FTX and seek legal advice on the suspension of withdrawals.

With about US$650 million worth of cryptoassets mysteriously siphoned from FTX’s crypto wallets last week, it is also possible for affected investors to obtain worldwide freezing orders against the wallets of these unidentified hackers and end any further squandering, Leong said.

Naomi Osaka and Tom Brady among stars named in FTX lawsuit

“I would not be too hopeful of getting anything back from the [insolvency] process given the substantial depletion of funds,” he added.

For now, investors like Jacob are left to rue what lies ahead after their heavy losses over the last two weeks.

“Last year, I was on track to making my first million by about 30 years old. Now, I’m resetting from zero,” said Jacob, who graduated from university in 2021. “I’m probably going to sell my car to save more money and accumulate all over again.”

* Not his real name