Amid the cryptocurrency market meltdown, The Monetary Authority of Singapore (MAS) has decided to reverse Hodlnaut’s licence approval.
According to Bloomberg, a MAS spokesperson announced the approval rescission for the crypto lender on Aug 9, after Hodlnaut had informed MAS of its intention to withdraw its application in the midst of halting withdrawals for its customers announced a day before.
The licence for the firm was applied under the Payment Services Act (PSA) to allow for it to provide digital payment token services and was granted an in-principle approval by the regulator under the act.
In a statement, the MAS stated that the investments into cryptocurrency is “highly hazardous” but as yet, the meltdowns in the industry have not posed any financial-stability risks for Singapore.
When asked about the Hodlnaut situation, one of MAS’ spokesperson stated that the regulator is continuously reminding the public that dealing in cryptocurrencies is highly hazardous due to the extremely volatile value, and the fact that the customers’ funds are not safeguarded by the law.
Firms that are currently or formerly linked with Singapore have been at the epicentre of this year’s crypto meltdown. Bitcoin and Ether, two of the largest cryptocurrencies, are down almost 50% year-to-date, whereas the terra/luna ecosystem had a catastrophic collapse.
Meanwhile, crypto hedge fund Three Arrows Capital, is being liquidated and several crypto lenders like Vault and Babel Finance have ceased customer withdrawals. The trading platform Zipmex, also suspended withdrawals but has since partially unfrozen its customers’ funds.
Furthermore, the MAS highlighted that the PSA licencing involves regulation of money laundering, terrorism financing, and technological risks. However, the firms are not subjected to risk-based capital or liquidity requirements. These entities are also not required to protect their customers’ funds or digital tokens from insolvency risks.
MAS added that the approach is shared by a majority of the jurisdictions but the sector’s difficulties have not had larger implications for Singapore.
“The turmoil in the crypto market has not caused any risks to the financial stability in Singapore. The spillover into the domestic financial system has been limited as our key financial institutions do not have large exposures to either the distressed crypto firms or the tokens,” its spokesperson reiterated.
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