FTX Collapse Brings about Reputational Damage to Singapore’s Temasek

Singapore's Deputy Prime Minister and Minister for Finance Lawrence Wong lectures in Singapore. Photo: REUTERS/Isabel Kua

Singapore’s state-owned investment company Temasek has decided to write down the value of its investment in FTX to zero, becoming the latest backer of the crypto exchange to be burned by its monumental collapse. 

Temasek poured in $210 million for a minority stake of approximately 1% of FTX International, and $65 million for a minority stake of 1.5% of FTX US, across two funding rounds from October 2021 to January 2022.

From a statistical perspective, this failed bet seems inconsequential. Temasek’s investment in FTX merely constituted 0.09% of its S$403 billion (USD $295 billion) portfolio. 

But while FTX’s collapse would have a limited impact on the city-state’s broader financial system, its “reputational damage” might be more far reaching. 

This seems to be the stance of Finance Minister Lawrence Wong, who is also the current deputy prime minister and is earmarked to take over for Singapore leader Lee Hsien Loong, 

While addressing the Singapore parliament, he claimed that Temasek "have proven to be too optimistic" and that it would be required for an "independent team to study and improve its processes and to draw lessons for the future." 

Such assurances and the promise of an internal review on Temasek is consequential. given its status as a state-owned entity that contributes to Singapore’s annual revenue. Deputy PM Wong goes even further to say that Singapore has no aspirations to become a crypto hub and seeks to be a ‘responsible and innovative digital asset player’.

These words hold weight given that confidence in Singapore’s ability to regulate the digital assets industry has been undermined by a series of crypto failures. These include the collapse of hedge fund Three Arrows Capital and crypto platform Hodlnaut.

Investors shy away from volatile assets like cryptocurrencies as central banks back away from lax monetary policies. Photo: REUTERS/Dado Ruvic

While better regulatory oversight of these centralized entities does not fall solely on Singapore’s shoulders, the city-state is responsible for balancing their credibility with innovation. The FTX collapse further highlights this struggle as Temasek’s lack of proper due diligence gave the crypto group a seal of approval from a major fund manager.

In a Facebook post on Saturday, Ho Ching, former Temasek chief executive and current wife of Singapore’s leader, Lee Hsien Loong, called the fund’s loss an “egg on our face.”

While other big-name institutional investors have seen their investments in FTX turn sour following the crypto firm's collapse, Temasek’s reputation as one of  the world’s most influential state-owned investors lends itself to greater public scrutiny in their investments. While BlackRock and Japan's SoftBank both made similar miscalculations regarding FTX, Temasek’s investments must be evaluated with a different metric. 

Along with sovereign wealth fund GIC, Temasek manages the Singapore government's reserves with the aim of generating long-term returns. With the nation’s reserves at stake, it is of no surprise that Singapore’s government faces parliamentary grilling over the FTX fallout.

Beyond financial ramifications, it is clear that the real underlying issue from the FTX fallout is Singapore’s reputation as a stable and sophisticated economic hub. This debacle seems to be contained and a broader fallout is unlikely. But, repeated mistakes such as this one might just come back to bite the innovative city-state.