Despite the “extremely dangerous” nature of investing in cryptocurrencies, financial sector collapses haven’t put Singapore’s financial stability at risk, according to city-state officials after another digital asset firm encountered difficulties.
A spokeswoman of the Monetary Authority of Singapore (MAS) stated in an email statement on Tuesday that the regulator has revoked its in-principle authorisation for cryptocurrency lender Hodlnaut to get a licence to offer services for digital payment tokens under the Payment Services Act. That happened after Hodlnaut informed MAS of its intention to revoke its application in response to the Monday announcement of a suspension in customer withdrawals. It was one of the select few companies to receive in-principle clearance from MAS under the Act.
In answer to a question concerning Hodlnaut’s condition, the regulator’s representative stated that the MAS has consistently warned the public that trading in cryptocurrencies is extremely risky. Customers’ money is not legally safeguarded, and the value of cryptocurrency is exceedingly unstable.
The MAS stated that while the firms are exempt from risk-based capital or liquidity requirements and are not required to protect customer money or digital tokens from insolvency risk, PSA licencing does involve regulation around risks related to money laundering and terrorism financing as well as technical risks. That’s comparable to how most governments operate, this was asserted. However, it claimed that the island country has not been particularly impacted by the sector’s problems.
“The turmoil in the cryptocurrency market has not posed financial stability risks in Singapore.”
The MAS representative added that because the main financial institutions do not have sizable holdings in either distressed cryptocurrency companies or cryptocurrencies, the Indirect effects on the domestic financial system have been extremely minimal.
The heart of this year’s crypto crisis has been entities that are currently or have previously had some connection to Singapore. The two largest cryptocurrencies, Bitcoin and Ether, have both experienced a year-to-date decline of around 50%. A huge collapse of the Terra/Luna ecosystem occurred, and Three Arrows Capital, a hedge firm, is in liquidation. Customers’ withdrawals have been suspended by creditors like Vauld and Babel Finance. The trading company Zipmex similarly stopped withdrawals, but it has now unfrozen some client funds after intervention by Thai authorities.