Lawrence Wong: FTX loss is disappointing, but won’t impact Net Investments Returns Contribution

Deputy Prime Minister and Minister of Finance Lawrence Wong answered a barrage of questions filed in parliament pertaining to the collapse of cryptocurrency exchange FTX, and its impact on Singapore’s financial markets.

No less than 30 questions were submitted by MPs from both the PAP and opposition party to the Ministry of Finance, to which DPM Wong reiterates the government and Monetary of Singapore’s overall approach to digital assets in addressing the questions in the House.

DPM Wong mentioned that what had happened with FTX had not only caused ‘financial loss to Temasek, but also reputational damage’.

Temasek recognises this and has issued a comprehensive statement explaining 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.

“I am 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,” said DPM Wong.

The Deputy Prime Minister added that the FTX loss will not impact the Net Investments Returns Contribution as the NIRC is tied to the overall expected long-term returns of Singapore’s investment entities and not to individual investments.

DPM Wong also explained that they have drawn a sharp distinction between growing an innovative and responsible digital asset ecosystem and speculation in cryptocurrency, which is why the government has actively discouraged it from 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. Cryptocurrencies are a different matter. 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,” added DPM Wong.

Touching on the investments by Temasek and GIC in the digital asset space, DPM Wong explained that where blockchain technology is concerned there is no direct exposure to cryptocurrencies.

“It is disappointing when there is a loss by our investment entities, as in the case of Temasek’s investment in FTX. Even more so, because the loss arose from what turned out to be a very badly managed company and from possible fraud and mishandling of customer funds. The fact that other leading global institutional investors like BlackRock and Sequoia Capital also invested in FTX does not mitigate this,” commented the Finance Minister.

In concluding his reply to the questions by the parliamentarians, DPM Wong said that the ‘FTX loss is disappointing, and is being taken seriously.’ But 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 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, they continue to add to the national reserves and provide a stable income stream to fund government programmes for a long time to come.