FTX loss is ‘disappointing and being taken seriously’: Singapore’s DPM

Temasek’s investment loss of $275 million in the collapse of cryptocurrency exchange FTX was “disappointing” and damaging for Singapore, said Deputy Prime Minister and Finance Minister Lawrence Wong.

Speaking in Parliament on Wednesday, Wong said that the losses Singapore’s sovereign wealth fund suffered were “being taken seriously.”

But the investment losses don’t mean the governance system is not working, he said. “Rather, it is the nature of investment and risk-taking.”

Temasek announced in mid-November that it will be writing down the value of its investment in FTX to zero, “irrespective of the outcome of FTX’s bankruptcy protection filing.” Temasek also said that they currently have no direct exposure in cryptocurrencies.

FTX has more than 100,000 creditors as well as liabilities in the range of $10 billion to $50 billion, according to a bankruptcy filing.

“What happened with FTX therefore has not only caused financial loss to Temasek, but also reputational damage,” Wong said.

“Temasek recognizes this and has issued a comprehensive statement to explain its due diligence process and the circumstances leading to its investment in FTX,” he said, adding that an internal review is being conducted to study what went wrong with the FTX deal and how to improve the process.

He said the government does not prescribe guidelines on the allocation of specific assets or asset classes, whether for cryptocurrencies or other assets.

Ultimately, the government holds the boards and management teams responsible for formulating investment strategies in accordance with the government’s overall risk tolerance, he said.

“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,” Wong said in response to Members of Parliament’s questions.

“In this way, we can continue to add to our national reserves and provide a stable income stream to fund government programs for a long time to come.”

He pointed out that despite the writing off of the FTX investment, Temasek’s early-stage portfolio, as of March, generated an internal rate of return in the mid-teens over the last decade — better than the industry average.

The FTX loss will also not impact the net investment returns of Singapore’s reserves, which are “tied to the overall expected long term returns of our investment entities and not to individual investments.”

The minister said that going forward, the Monetary Authority of Singapore — the country’s financial regulator and central bank — plans to introduce some basic investor protection measures for digital payment token service providers which are licensed in Singapore.

After receiving industry and public feedback, MAS will finalize the proposals and implement appropriate regulatory measures.

But he cautioned that even with these measures, the monetary authority will not be able to prevent crypto service providers from failing.

“Those who trade cryptocurrencies must be prepared to lose all their value. No amount of regulation can remove this risk,” he warned.