What we learnt from Hodlnaut's woes

What happened?

Hodlnaut, a Singapore-based crypto lender has informed users that they will be halting withdrawals, token swaps, and deposits with immediate effect. 

It’s not the first crypto lender to be facing pressure from the meltdown, so why should we care?

Firstly, Hodlnaut was growing rapidly and has more than 10,000 users and $250 million in assets based on its company website. This means that there’d probably be someone around us who is impacted by the suspension of withdrawals. 

Also, Hodlnaut was one of the first few firms to have received an in-principle approval by the Monetary Authority of Singapore (MAS) for the Payment Services Act (PSA) earlier this year. This would have allowed Hodlnaut to provide digital payment token services under the Payment Services Act. 

Following the halting of withdrawals, MAS has rescinded this in-principle approval for Hodlnaut, and said that the company will no longer be allowed to conduct regulated services in Singapore. 

What will happen to my money with Hodlnaut? 

According to Hodlnaut’s FAQ, they will not be able to facilitate any withdrawals of funds and they are unable to provide a definite date that withdrawals will resume. 

What this means is that if you have existing funds in Hodlnaut, you will not be able to get back your assets until further notice.

Isn’t Hodlnaut regulated? Are my funds safe?

Yes, Hodlnaut did receive an in-principle approval by the MAS.

However, it was just an in-principle approval pending fulfillment of various requirements.   

More importantly, Hodlnaut’s activities in crypto lending or borrowing are not regulated by the MAS under the existing PSA. The in-principle approval was for them to offer token swap services. 

This means that their interest account and fixed-term deposit service were not regulated by the MAS. 

Unfortunately, assets held with Hodlnaut are also not insured by the Singapore Deposit Insurance Corporation (SDIC). Hence, you will not get insurance payouts if Hodlnaut were to face challenges in meeting withdrawal requests.

What can we learn from this? 

#1 - Always check the type of activities the company is regulated or licensed for

Never take the company’s word for it. You can check if the company is regulated by the MAS using the website link here.

#2 – Put your eggs across many baskets

This is one of Beansprout’s key investing philosophies. When it comes to investing, it’s always good to diversify. 

And this means diversifying not just across different sectors, markets, assets, but also platforms. 

We should always be cautious against putting all of our assets on one platform, particularly crypto-based platforms.

#3 – Stay in the game

This is another of Beansprout’s investing philosophies. What this means is to not do things that will cause you to be wiped out. 

Put all your life savings in a single investment? Probably not. 

All investments carry risks, and you’d never know where the next risk could come from. 

A few months ago, it was the collapse of Terra LUNA. Tomorrow it might be another crypto platform halting withdrawals. 

What we’ve realized is that sticking around for a long time, without being wiped out or giving up, is what makes the largest difference to investing. 

Financial writer Morgan Housel summed it well by saying that “If I had to summarise money success in a single word, it would be survival”
 

What can I do?

#1 Keep track of further updates

Hodlnaut announced that they will be providing more updates next Friday, 19 August 2022 and we will be sure to look out for it. 

Meanwhile, we will also be tracking their Twitter to see if they have any periodic updates. 

#2 Exercise caution

Hodlnaut is not the first crypto platform to freeze withdrawals. There were other similar cases of crypto platforms freezing withdrawals this year, such as Celsius Network and Zipmex. 

This is why MAS has reiterated that “dealing in cryptocurrency is highly hazardous” and “customers’ monies are not protected under the law”.

As of today, Celcius Network has yet to resume its withdrawal service. Zipmex has only just begun to allow users to partially withdraw Bitcoin and Ether from their trading accounts. 

The insolvency situation may spread and there is a risk that other crypto platforms may be affected. 

If you’d like to sleep better at night without having to worry about your crypto platform also halting withdrawals, you might want to consider withdrawing your crypto assets to a self-hosted wallet with your own our keys. 

#3 Don’t be afraid to seek help

Do not hesitate to reach out if you are affected in one way or another. 

There are several helplines that might be helpful

• Samaritans of Singapore: 1800 221-4444 (24 hours)
• Institute of Mental Health: 6389-2222 (24 hours)
• Singapore Association for Mental Health: 1800 283-7019 (Mon to Fri, 9 am to 6 pm)
• TOUCHline: 1800 377-2252 (Mon to Fri, 9 am to 6 pm)
• Brahm Centre Assistline: 6655-0000 (Mon to Fri, 9 am to 6 pm)
• After hours: 8823-0000 (WhatsApp available)

Our Telegram group is also open and you can PM us if you need someone to talk to.