The FTX contagion made its way into Singapore and its parliamentarians cannot come to terms with the fact that their government failed to protect its citizens. The lawmakers are now calling for transparency and stringent measures to prevent such an occurrence from happening again
So how did Singapore find itself in this situation?
FTX contagion in Singapore
November 17 2022, Temasek announced its plan to write off its entire FTX investment.
Temasek is a state-owned company in Singapore incorporated in 1974. The company managed over S$400B in 2022. The company’s accountability to taxpayers has been a subject of debate for years so, when the company announced it was writing off its holdings in the troubled FTX, it was pandemonium galore.
According to information provided by CNA, a state-owned news broadcaster, Temasek would write off its entire investment of S$403 B ($293B) despite the outcome of FTX’s bankruptcy protection filing.
According to Temasek, their investment in the exchange was meant to provide a protocol-agnostic and neutral exposure to crypto markets in return for a fee income model.
We invested $210 million for a minority stake of ~1% in FTX International, and invested $65 million for a minority stake of ~1.5% in FTX US, across two funding rounds from October 2021 to January 2022. The cost of our investment in FTX was 0.09% of our net portfolio value of S$403 billion as of 31 March 2022.Temasek
Temasek categorically had no exposure to digital assets listed on the exchange.
The firm admitted to conducting due diligence on FTX, a process that lasted 8 months between February and October 2021. The firm audited the exchange’s balance sheets, which were okay, and due diligence on regulatory compliance, and cybersecurity. Cybersecurity experts and legal experts conducted legal and regulatory reviews of the investments.
The due diligence clearly did not mitigate all risks. Their investment was composed of about a 1% stake and therefore did not warrant a seat on the board.
The Singaporean lawmakers did not take the matter lightly. They will grill Temasek for three days beginning November 28 with a keen focus on the firm’s investment in the exchange and cryptocurrency regulations in the country.
The parliamentary sittings will play part in charting crypt regulatory laws in Singapore. Temasek is however hesitant stating that they are not a private investment company and only manage funds from the previous government. The government periodically invests in the firm and declares its dividends annually.
Opposition MPs from the Workers party took particular interest in the investments by Temasek and Singapore’s sovereign wealth fund GIC.
Opinions raised by the parliamentarians included:
- Steps by MAS to reduce crypto trading risks, measures by GIC and Temasek to implement the same.
- Ministry of Finance to track Temasek and GIS investments
- Presence of regulations to provide due diligence by key statutory boards handling government assets.
- Government to consider adding Temasek and GIC to the audit ambit of the Auditor-General’s Office and oversight by the Public Accounts Committee.
- Government to create bipartisan committees to question Temasek and GIC on their risk management strategies, and performance confidentially.
- Impact of FTX collapse and due diligence measures taken by cryptocurrency exchanges.
- Transparency by Temasek on the companies value, its investments in FTX and sister companies
- Provision of data providing the number number of investors who were exposed to FTX and the value of their investments.
The lawmakers expect the mentioned companies to comply and provide relevant information since it affected the Singapore taxpayers.
Singapore is one of the most crypto-friendly countries in the world and provides zero capital gains tax on cryptocurrencies. Mishaps by the crypto industry will force the country to adopt more stringent laws to protect its citizens.