(Bloomberg) -- Cryptocurrency investment is “highly hazardous” but meltdowns in the sector haven’t created financial-stability risks for Singapore, regulators in the city-state said after another digital-asset firm ran into trouble.
The Monetary Authority of Singapore has rescinded its in-principle approval for crypto lender Hodlnaut to obtain a license to provide digital payment token services under the Payment Services Act, an MAS spokesperson said in an emailed statement Tuesday. That came after Hodlnaut told MAS of its intention to withdraw its application amid its halt in customer withdrawals announced Monday. It had been one of the few firms granted in-principle approval by MAS under the Act.
“MAS has been continually reminding the general public that dealing in cryptocurrency is highly hazardous,” the regulator’s spokesperson said in response to an inquiry about Hodlnaut’s situation. “Not only are the values of cryptocurrencies extremely volatile, customers’ monies are not protected under the law.”
Entities that currently or previously have been affiliated with Singapore in some way have been at the epicenter of this year’s crypto meltdown. Bitcoin and Ether, the two biggest cryptocurrencies, are both down about 50% year-to-date. The Terra/Luna ecosystem suffered a massive collapse and hedge fund Three Arrows Capital is in liquidation. Lenders like Vauld and Babel Finance have halted customer withdrawals. Trading platform Zipmex also halted withdrawals, but it’s since partially unfrozen client funds.
In its statement, the MAS noted that PSA licensing involves regulation around money laundering and terrorism financing risks as well as technology risks, but that the firms are not subject to risk-based capital or liquidity requirements, nor are they required to safeguard customer money or digital tokens from insolvency risk. It said that’s similar to the approach taken in most jurisdictions. Still, the trouble in the sector hasn’t had broader implications for the island nation, it said.
“The turmoil in the cryptocurrency market has not posed financial stability risks in Singapore,” the MAS spokesperson said. “Spillover to the domestic financial system has been very limited as our key financial institutions do not have significant exposures to either distressed cryptocurrency firms or cryptocurrencies.”
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