Temasek Shifts Crypto Investing Stance After US$275 Million FTX Loss – The Online Citizen Asia

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SINGAPORE — Singaporean sovereign wealth fund Temasek Holdings has announced that it has changed its stance on the cryptocurrency market from its previously daring undertakings, citing regulatory uncertainty prevalent in the industry. said it is not currently seeking investment in cryptocurrency companies.

The group’s decision to invest in cryptocurrency company FTX resulted in a write-down of more than US$275 million (approximately S$369 million) in November 2022.

The investment represented just 0.09% of Temasek’s net portfolio value of S$403 billion as at 31 March 2022, making Temasek one of FTX’s largest outside investors. The investment firm had no board seat and only held a 1.5% stake in FTX.

Over the months of October 2021 to January 2022, Temasek has invested a total of US$275 million in FTX in two funding rounds.

In an interview with CNBC on Monday, July 7, Temasek Chief Investment Officer Rohit Sipahimalani revealed the company’s perspective and cautious approach to cryptocurrency investing.

When asked by a CNBC reporter about Temasek’s potential for future investments in crypto assets and exchanges after his FTX experience, Sipahimalani expressed concern about further investments in exchanges.

He cited recent events and pervasive regulatory uncertainty as the main reasons for this cautious stance.

“I think it would be very difficult to make new investments in exchange for that kind of regulatory uncertainty.”

“We have never thought about investing in cryptocurrencies. Investing in FTX is also about investing in exchanges where you can earn commission income without thinking. [of] Balance sheet risk and trading risk,” he explained.

However, Sipahimalani acknowledged that Temasek now acknowledges that the exchange did not perform as expected.

Regarding potential future investments in cryptocurrency exchanges, Sipahimalani emphasized that Temasek will assess the situation based on the evolving regulatory landscape.

“If you have the right regulatory framework, we’re comfortable with it, and you have the right investment opportunities, there’s no reason why we shouldn’t consider it,” he said. ‘ said. Given the current situation, invest in exchanges with confidence. “

Temasek’s investment in FTX was part of a strategy to “explore new disruptive technologies.”

However, Sipahimalani defended Temasek’s investment in FTX, saying it is part of the company’s strategy to explore new disruptive technologies.

He further explained that early-stage investments like FTX are considered binary and risky, which is why the firm relies on diversification to mitigate potential losses.

Nevertheless, Sipahimalani stressed that limiting investments to less than 6% of the total portfolio has reduced risk.

While Temasek acknowledged his diligence when investing in FTX, Sipahimalani expressed disappointment that fraud and misrepresentation were discovered after the fact.

Sipahimalani acknowledged the difficulty of uncovering such issues during due diligence, but asserted that lessons have been learned and processes have been improved.

You can watch Rohit Sipahimalani’s interview on CNBC here.

Temasek Holdings reports loss of S$7.3 billion

Temasek Holdings said on Monday that its net portfolio value in fiscal year 2023 will fall 5.2% to S$382 billion from S$403 billion in the previous year.

The company reported a loss of S$7.3 billion, a sharp change from last year’s net profit of S$10.6 billion.

The group said this was largely due to changes in accounting standards, including mark-to-market (MTM) gains and losses. Adjusting for MTM, the group would post a profit of his S$14.7 billion.

Temasek’s chief financial officer, Pun Ching Yi, said this was the first time a loss had been reported since the new accounting standards were introduced in 2018.

In May, Temasek cut compensation for its senior management and investment team responsible for FTX trading.

Responding to questions posed in Singapore’s parliament about the FTX controversy, Deputy Prime Minister Lawrence Wong stressed that the loss should not be viewed as a failure of Temasek’s governing system.

He argued that no amount of due diligence and monitoring can completely eradicate the risks associated with investing. He also revealed that Temasek has embarked on an internal review conducted by an independent team separate from the investment team.

In May 2023, Temasek Holdings announced it had cut compensation for senior management and the investment team responsible for FTX trading.

Temasek Chairman Lim Bun Heng said the company’s independent team conducted a thorough internal review of the investment and submitted the results directly to the board’s Risk and Sustainability Committee and the board itself. clarified.

“There was no misconduct on the part of the investment team leading up to the investment recommendation, but the investment team and senior management, who are ultimately responsible for the investment decision, were collectively held accountable and had their compensation reduced,” he said.

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