Bankruptcy of Cryptocurrency Trading Platform FTX and Impact on Singapore Financial Markets, Regulation of Such Asset Class and Strategies of Singapore's Investment Entities

MAS

Parliamentary Question by Mr Zhulkarnain Abdul Rahim: To ask the Prime Minister what are the lessons and impact from the recent bankruptcy of cryptocurrency exchange FTX on the timeframe and measures to be taken for the implementation of a purpose-bound digital Singapore dollar by MAS.

Parliamentary Question by Ms He Ting Ru: To ask the Prime Minister (a) whether there is an estimated number of Singapore investors who are affected by the insolvency of cryptocurrency trading platform FTA; (b) what is the estimated size of total investments affected; and (c) of these, how many are from retail investors. 

Parliamentary Question by Mr Shawn Huang Wei Zhong: To ask the Prime Minister with regard to the collapse of the FTX Crypto Exchange recently (a) what is the impact on Singapore investors and businesses; (b) what are some of the measures in place to protect investors; and (c) what are the short- and medium-term plans to ensure a well-paced crypto industry development in Singapore.

Parliamentary Question by Ms Tin Pei Ling: To ask the Prime Minister in view of the bankruptcy of cryptocurrency trading platform FTX (a) how will this affect Singapore’s financial market and economy; and (b) how many retail traders in Singapore are affected.

Parliamentary Question by Mr Seah Kian Peng: To ask the Deputy Prime Minister and Minister for Finance (a) what is the Government's strategy for managing cryptocurrency investments in future, including risk mitigation strategies; (b) what is the extent to which private retail investors have been affected by the recent rout of cryptocurrencies; and (c) whether the Government will do more to educate people about the risks of such investments.

Parliamentary Question by Mr Yip Hon Weng: To ask the Prime Minister (a) whether MAS plans to further tighten cryptocurrency trading by retail investors; (b) whether Singapore retail users should only be allowed to park their assets under a local entity of any cryptocurrency exchange; and (c) what additional safeguards or regulations will be implemented on cryptocurrency firms operating in Singapore to protect local consumers.

Parliamentary Question by Mr Lim Biow Chuan: To ask the Deputy Prime Minister and Minister for Finance in light of the collapse of cryptocurrency trading platform FTX (a) what is the financial loss suffered by Temasek Holdings; and (b) whether this will affect the Net Investment Returns Contribution for the next three financial years.

Parliamentary Question by Mr Yip Hon Weng: To ask the Prime Minister (a) what factors are taken into account in determining the eligibility of Binance and FTX cryptocurrency trading platforms to operate in Singapore; and (b) whether these factors for licence eligibility will be reviewed.

Parliamentary Question by Mr Edward Chia Bing Hui: To ask the Prime Minister whether MAS intends to regulate digital token service providers and exchanges to ensure liquidity requirements so as to safeguard customers' digital tokens from insolvency risks.

Parliamentary Question by Dr Lim Wee Kiak: To ask the Prime Minister (a) what is the magnitude of losses incurred by Singaporean retail investors and individuals affected by cryptocurrency trading platform FTX’s collapse; and (b) whether FTX’s collapse will have a domino effect on other cryptocurrency exchanges.

Parliamentary Question by Ms Cheryl Chan Wei: To ask the Prime Minister (a) what further steps will be taken to strengthen the system for cryptocurrency companies with non-licensed offshore exchanges that have operations in Singapore; and (b) whether the bar will be raised to prevent local retail investors without adequate risk knowledge or direct funding means from participating in investments.

MOF

Parliamentary Question by Mr Zhulkarnain Abdul Rahim: To ask the Deputy Prime Minister and Minister for Finance in light of the recent bankruptcy of cryptocurrency exchange FTX (a) what are the lessons drawn from this incident; and (b) what are the immediate and long-term steps that will be taken by MAS to help mitigate against consumer risks in cryptocurrency trading.

Parliamentary Question by Mr Zhulkarnain Abdul Rahim: To ask the Prime Minister (a) what is the impact of the recent bankruptcy of cryptocurrency exchange FTX on Temasek Holdings’ investment in FTX; and (b) what are the due diligence or measures undertaken prior to investments in cryptocurrency trading platforms such as FTX. 

Parliamentary Question by Mr Saktiandi Supaat: To ask the Prime Minister (a) what is the value of Temasek Holdings’ investments in cryptocurrency trading platform FTX and its subsidiaries when FTX filed for bankruptcy in the United States on 11 November 2022; (b) whether the Government has any data on the exposure of Singapore investors to FTX in terms of the number of investors and the total value of their holdings; (c) whether FTX’s sudden bankruptcy will affect (i) Singaporeans and (ii) MAS’s ongoing consultation in relation to consumer harm from cryptocurrency trading; and (d) if so, how.

Parliamentary Question by Mr Leong Mun Wai: To ask the Deputy Prime Minister and Minister for Finance whether the Ministry will consider introducing additional investment guidelines to the investment mandate of our sovereign funds in view of the recent investments made on cryptocurrency exchanges.

Parliamentary Question by Mr Desmond Choo: To ask the Prime Minister with the collapse of cryptocurrency trading platform FTX (a) how many institutional and retail investors in Singapore are affected; and (b) whether are there further downside risks in other similar platforms.

Parliamentary Question by Mr Leon Perera: To ask the Deputy Prime Minister and Minister for Finance given that the Government does not direct GIC's and Temasek Holdings’ individual investment decisions but holds their boards accountable for their performance, whether the Government will consider creating a bipartisan Standing Select Committee of Parliament that meets regularly to question the boards of the two sovereign wealth funds on their performance, strategies, and risk management approaches, on a confidential basis.

Parliamentary Question by Assoc Prof Jamus Jerome Lim: To ask the Prime Minister in light of MAS’s proposed measures to reduce cryptocurrency trading risks, whether similar suggestions have been promulgated to Government-related investment entities such as GIC and Temasek Holdings.

Parliamentary Question by Ms He Ting Ru: To ask the Deputy Prime Minister and Minister for Finance (a) whether there are regulations or a governance framework as to the basic level of due diligence to be observed by entities listed in the Fifth Schedule of the Constitution handling Government assets which involve the investment of significant public funds; and (b) whether there are ongoing due diligence or audit requirements for these investments.

Parliamentary Question by Ms He Ting Ru: To ask the Prime Minister (a) whether MAS will consider leading a specific study into the regulatory lessons to be learnt from the collapse of cryptocurrency exchanges such as Terra and FTX; and (b) whether there needs to be tighter requirements to ensure the stability of regulated cryptocurrency exchanges in Singapore.

Parliamentary Question by Ms Mariam Jaafar: To ask the Prime Minister in light of the recent bankruptcy of cryptocurrency trading platform FTX, when will additional consumer protection rules be considered, including limiting retail participation and rules on leverage when transacting in cryptocurrencies.

Parliamentary Question by Mr Dennis Tan Lip Fong: To ask the Prime Minister whether the Government intends to introduce further measures or safeguards to regulate cryptocurrency trading or investment, as well as to protect Singaporean retail investors in general.

Parliamentary Question by Mr Melvin Yong Yik Chye: To ask the Prime Minister whether the recommendations in MAS’ ongoing public consultation can be expedited, to reduce the risk of consumer harm from cryptocurrency trading and to support the development of stablecoins as a credible medium of exchange in the digital asset ecosystem.

Parliamentary Question by Assoc Prof Jamus Jerome Lim: To ask the Deputy Prime Minister and Minister for Finance (a) whether the Ministry tracks the extent of concentration of investments by GIC and Temasek Holdings investment vehicles either by (i) geography or (ii) asset class; and (b) whether there are thresholds that trigger warnings of excessive portfolio risks to the Ministry.

Parliamentary Question by Ms He Ting Ru: To ask the Prime Minister in view of the various insolvencies of cryptocurrency exchanges and extreme volatility in the cryptocurrency markets in the last year (a) how will this affect our efforts to become a robust global blockchain and fintech hub; (b) whether MAS will consider further regulatory measures to prevent any contagion into the wider cryptocurrency, fintech and financial markets; and (c) if so, what are they.

Parliamentary Question by Mr Gerald Giam Yean Song: To ask the Deputy Prime Minister and Minister for Finance (a) whether there are guidelines or restrictions on statutory boards and entities listed in the Fifth Schedule of the Constitution of the Republic of Singapore with regard to investing in cryptocurrency-related assets; (b) if so, what are those guidelines or restrictions; and (c) whether all statutory boards and scheduled entities have fully adhered to those guidelines.

Parliamentary Question by Mr Leon Perera: To ask the Deputy Prime Minister and Minister for Finance as Temasek Holdings and GIC are Fifth Schedule entities, whether the Government will consider adding the two sovereign wealth funds to the audit ambit of the Auditor-General's Office (AGO) and oversight by the Public Accounts Committee, on the condition that commercially sensitive elements in any audit report be made available to legislators but redacted from published reports.

Parliamentary Question by Ms Hazel Poa: To ask the Deputy Prime Minister and Minister for Finance in cases where large investment losses are made by Temasek Holdings and GIC, whether internal and external investigations are conducted to ascertain whether there is negligence or misconduct.

Parliamentary Question by Ms He Ting Ru: To ask the Deputy Prime Minister and Minister for Finance (a) whether there is a Singapore equivalent of the Norwegian Ministry of Finance’s Council of Ethics for the observation and exclusion of companies from the Norwegian Government Pension Fund Global; and (b) if so, whether the list can be shared and maintained publicly for full accountability.

Parliamentary Question by Ms Hazel Poa: To ask the Deputy Prime Minister and Minister for Finance (a) how does the Government monitor and assess the performance of Temasek Holdings and GIC; (b) whether monitoring and assessing their performance includes benchmarking their performance with those of other funds; and (c) if so, what are the funds against which Temasek Holdings and GIC are benchmarked against and how do they compare.

Parliamentary Question by Ms He Ting Ru: To ask the Deputy Prime Minister and Minister for Finance (a) whether there are guidelines for the requisite sustainability and environmental due diligence and audits for state-linked investments locally and overseas; (b) whether there are guidelines for monitoring investments with potentially substantial climate change impact; and (c) how can state-linked investments continue to do their part and strengthen their contributions to make progress on global sustainability and environmental responsibility.

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Parliamentary Reply by Deputy Prime Minister, and Minister for Finance Mr Lawrence Wong:

1. Mr Speaker, Sir, with your permission, can I answer PQs 3 to 20 as well as all of other Questions related to the bankruptcy of the trading platform FTX together?   

2. Sir, before I address these questions, let me reiterate the Government's and MAS’ overall approach to digital assets. 

3. We have drawn a sharp distinction between growing an innovative and responsible digital asset ecosystem and speculation in cryptocurrency, which we actively discourage for 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. Early forecasts have proven too optimistic, and it is still not clear that blockchain technology will develop beyond limited use cases into a game-changer for a wide range of industries.  This is why we are piloting specific use cases to test the possibilities in the financial sector. 

4. 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.

5. Members have raised two broad issues in their questions. First, on regulatory measures and the impact of the FTX bankruptcy on our financial system; and second, on the investments made by Temasek in FTX itself.  

6. Let me start with the first issue. The collapse of FTX and other major cryptocurrency platforms should bring about much-needed rationalisation in the cryptocurrency space. The repercussions on the cryptocurrency ecosystem globally are still unfolding, and we are watching this. 

7. We do not have data on the number of Singapore retail users of FTX, just as for other platforms that are not licensed here and do not operate in Singapore. Unfortunately, those who invested in cryptocurrencies through FTX’s global platform would have lost money.  

8. As for Singapore’s broader financial system and economy, our assessment is that spillovers from the FTX collapse will be very limited. MAS’ surveillance shows that key financial institutions in Singapore have insignificant exposures to cryptocurrency and crypto players. 

9. MAS has explained its approach to regulating financial institutions providing cryptocurrency services, also known as digital payment token (DPT) service providers, in Singapore. 

10. Such DPT service providers are regulated by MAS to address money laundering, terrorist financing, and technology risks. Whether the DPT service providers can address these risks robustly is a key consideration in licensing them to operate in Singapore. Importantly, DPT service providers are currently not regulated for safety and soundness, nor for investor protection. This is also the prevailing approach in most jurisdictions. MAS has been consistently warning since 2017 that dealing in cryptocurrencies is hazardous. Recent events have underscored these hazards.

11. MAS has also in its recent statements explained the role of MAS’ Investor Alert List (IAL) and why FTX was not listed on it. Let me set this out again. The IAL serves a very specific purpose: to warn the public of entities that may be wrongly perceived as being regulated by MAS, especially those who solicit Singapore customers without the requisite licence. MAS did not have reason to list FTX on the IAL because there was no evidence that it was soliciting users in Singapore. This is unlike Binance, which was placed on the IAL for actively soliciting users in Singapore without a valid licence, and is being investigated presently by CAD for possible violation of the Payment Services Act. 

12. This does not mean that all entities which are not listed on the IAL are safe to deal with. MAS cannot possibly provide an exhaustive list of all the unsafe or unlicensed entities that exist in the world.

13. Going forward, MAS plans to introduce some basic investor protection measures for DPT service providers which are licensed in Singapore. MAS recently published a consultation paper, which includes proposals that DPT service providers, amongst other things:

(a) Administer a risk awareness test to evaluate if potential retail customers are suitable for accessing cryptocurrency services; 

(b) Segregate customers’ assets from their own assets so as to prevent lending out of customers’ money and protect customer interests should the service provider fail; and

(c) Refrain from operating a trading platform while simultaneously taking proprietary positions for their own account, to prevent conflicts of interest. 

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

14. Let me emphasise that even with these proposed measures, MAS will not be able to prevent DPT service providers from failing, or customers from suffering losses. Cryptocurrency platforms can collapse due to fraud, unsustainable business models, or excessive risk-taking. FTX is not the first cryptocurrency platform to collapse, nor will it be the last. 

15. Further, even if a cryptocurrency platform is well-managed, cryptocurrencies themselves, as I mentioned earlier, are highly volatile and have no intrinsic value. Those who trade in cryptocurrencies must be prepared to lose all their value. No amount of regulation can remove this risk.

16. Next let me address the Temasek investment in FTX, and the Government’s stance on our investment entities’ and Statutory Boards’ exposure to digital assets and cryptocurrencies. 

17. The Government does not prescribe guidelines on the allocation of specific assets or asset classes, whether for cryptocurrencies or other assets. This applies to our Statutory Boards, as well as our three investment entities managing our whole-of-Government assets – namely Temasek, GIC, and MAS. 

18. Statutory Boards have specific mandates and functions. They are not investment entities, but they have the flexibility to invest their surpluses. They typically do this through external fund managers, under the oversight of their respective supervising Boards and Ministries. We expect Statutory Boards to make prudent investment decisions and not be distracted from their core functions. 

19. For our investment entities, the Government sets out its risk tolerance limits; monitors for appropriate diversification in asset classes, sectors, and geographies; and ensures that downside risks are not excessive. 

20. In this spirit, the Government does not prescribe an exclusion list for specific assets. But we expect the entities to incorporate environmental, social, and governance or ESG considerations into their investment processes. They should do so in a way that best suits their investment mandates, and preserves their reputation with global partners and markets.

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

22. One of the areas Temasek and GIC’s private equity arm operate in is new technology and early-stage companies. There will always be new waves of innovation and technology that seek to disrupt the status quo. Some waves will turn out to be hype and fizzle out over time. Other technologies will prove revolutionary and transformational, like the internet. But even with genuinely revolutionary technology, there are risks. Many start-ups will fail, while a few will prove successful and grow into industry leaders like Tencent and BioNTech. The skill of venture capitalists lies in discerning the promising projects and backing them. Risk taking is an essential part of such investments.

23. As long-term investors, our investment entities have to operate in this space. They do their best due diligence based on the information available. Having made the investments, they monitor investee companies closely, but no amount of due diligence and monitoring can eliminate the risks altogether. 

24. Insofar as blockchain technology is concerned, Temasek and GIC have some investments in the digital asset space. But they have no direct exposure to crypto¬currencies. 

25. 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.  

26. What happened with FTX therefore has not only caused financial loss to Temasek, but also reputational damage. Temasek recognises this and has issued a comprehensive statement to explain 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.

27. 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.  

28. The FTX loss will also not impact the NIRC as the NIRC is tied to the overall expected long-term returns of our investment entities and not to individual investments. 

29. Following the FTX collapse, some Members have suggested implementing more guidelines and safeguards over the investments made by Temasek and GIC. That is understandable. But the governance structures in place today for Temasek and GIC are already more extensive than those of a typical company.

30. Temasek, which is an investment holding company, is audited by commercial auditors. GIC, which manages public funds, is audited by the Auditor-General. As Fifth Schedule entities, both Temasek and GIC are subject to the President’s oversight of their budgets and key appointments. In Parliament, if there are any questions by Members about the performance of the entities, MOF will respond to them, as we are doing now.  

31. There is therefore no need for additional audit requirements or Parliamentary Committees. Instead, we should insulate the boards from political pressures. Let them do their work, carry out their responsibilities, and fulfil their investment mandates commercially and professionally. 

32. The investment entities themselves publish their performance with respect to broad market indices – in Temasek’s case the MSCI equities indices, and in GIC’s case the Reference Portfolio, comprising 65% global equities and 35% global bonds. These market indices and data from reputable global investment funds serve as useful reference. But ultimately, the Government evaluates the entities based on their long-term performance, and their track records show that they have performed creditably, even in challenging environments. 

33. Sir, in conclusion, 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 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. In this way, we can continue to add to our national reserves, and provide a stable income stream to fund government programmes for a long time to come.