Singapore government-owned investment company Temasek has initiated an internal review, deputy prime minister and minister for finance Lawrence Wong told parliament. The initiation was done after Temasek said it would write down its US$275 million investment into cryptocurrency exchange FTX.
In response to questions, minister Wong said that while it is understandable that some members have suggested implementing more guidelines and safeguards over the investments made by Temasek and GIC, "the governance structures in place today for Temasek and GIC are already more extensive than those of a typical company".
“ There is therefore no need for additional audit requirements or Parliamentary Committees. Instead, we should insulate the boards from political pressures. Let them do their work, carry out their responsibilities, and fulfil their investment mandates commercially and professionally,” he said.
Nonetheless he shared that what happened with FTX has not only caused financial loss to Temasek, but also reputational damage.
"Temasek recognises this and has issued a comprehensive statement to explain its due diligence process and the circumstances leading to its investment in FTX. Temasek has also initiated an internal review by an independent team to study and improve its processes, and to draw lessons for the future," he said. He added that while the FTX loss is disappointing, and is being taken seriously, the occurrence of investment losses does not in itself imply that the governance system is not working. Rather, this is the nature of investment and risk-taking.
“What is important is that our investment entities take lessons from each failure and success, and continue to take well-judged risks in order to achieve good overall returns in the long term. In this way, we can continue to add to our national reserves, and provide a stable income stream to fund government programmes for a long time to come,” he said. DPM Wong also said he is confident that the Temasek Board and management team will learn and improve from this experience.
"At the same time, we should see this FTX loss in the broader context of Temasek’s performance in early-stage investments. After writing-off the FTX investment, Temasek’s early-stage portfolio as at March this year has generated an internal rate of return in the mid-teens over the last decade, better than industry averages,” he added. Meanwhile, Temasek's internal review will be completed by an independent team and its intention is "to study and improve its processes and to draw lessons for the future". The investment company will also remain transparent with its FTX investment, despite its end result of the cryptocurrency exchange’s bankruptcy protection filing.
Other than Temasek, several notable names such as BlackRock and Sequoia Capital had also made investments in FTX.
DPM Wong also said that the government has drawn a sharp distinction between growing an innovative and responsible digital asset ecosystem and speculation in cryptocurrency, which we actively discourage for the retail public.
“We encourage and support innovation in digital assets because we see potential for new technologies to transform cross-border payments, trade and settlement, as well as capital market activities. Early forecasts have proven too optimistic, and it is still not clear that blockchain technology will develop beyond limited use cases into a game-changer for a wide range of industries. This is why we are piloting specific use cases to test the possibilities in the financial sector,” he said.
Calling, cryptocurrencies “a different matter”, DPM Wong said they are purely speculative as an investment asset, and have no intrinsic value. That is why MAS has consistently warned the retail public not to deal with them. Moreover, he added that the collapse of FTX and other major cryptocurrency platforms should bring about much-needed rationalisation in the cryptocurrency space.
“We do not have data on the number of Singapore retail users of FTX, just as for other platforms that are not licensed here and do not operate in Singapore. Unfortunately, those who invested in cryptocurrencies through FTX’s global platform would have lost money,” he said. He added, “The repercussions on the cryptocurrency ecosystem globally are still unfolding, and we are watching this.”
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