Although Temasek attributed the result to factors such as the risk of recession, rising interest rates and geopolitical tensions, its failure in the crypto field cannot be ignored. On the day of the financial report, Temasek Chief Investment Officer Rohit Sipahimalani said in an interview with CNBC that Temasek currently does not intend to invest in cryptocurrency companies amid regulatory uncertainty in the cryptocurrency industry.
On Tuesday, Singapore's sovereign wealth fund Temasek announced its worst performance in seven years. In the annual report for the 2023 fiscal year ending March 31 this year, Temasek's portfolio net value shrank by 5.2% to S$382 billion (US$284 billion), the first net loss since fiscal 2020. In addition, as of March 31, Temasek's annual total shareholder return was -5.07%, the worst annual performance since 2016.
Although Temasek attributed the result to factors such as the risk of recession, rising interest rates and geopolitical tensions, its failure in the crypto field cannot be ignored. On the day of the financial report, Temasek Chief Investment Officer Rohit Sipahimalani said in an interview with CNBC that Temasek currently does not intend to invest in cryptocurrency companies amid regulatory uncertainty in the cryptocurrency industry. Sipahimalani also added, "We have never thought about investing in cryptocurrencies. Even the investment in FTX refers to an investment in the exchange, which enables us to obtain fee-based income without considering balance sheet risk or any trading risk."
As the most influential national sovereign fund, Temasek's attitude towards cryptocurrencies is also a weathervane to some extent. From officially entering the blockchain industry through investment and entrepreneurship around 2018, to losing $275 million on FTX, taking the lead in launching the venture capital accountability system, and announcing the temporary withdrawal of crypto investments today, is Temasek really going to fail in the crypto field?
Singapore's most powerful state-owned enterprise's Web3 journey, investing and entrepreneurship
Temasek was first established in 1974. The Singaporean government’s Ministry of Finance holds 100% of the shares of Temasek, which is also the most well-known of all wholly-owned companies of the Singaporean government. Temasek controls almost all of Singapore’s most important and largest companies, including Singapore Telecommunications, Singapore Airlines, DBS Bank, and Singapore Metro. It can be said that it almost dominates the economic lifeline of Singapore. However, although it is state-owned capital controlled by the government, the government does not directly manage the enterprises and follows market-oriented operations.
An important turning point in Temasek's rise was when Ho Ching took over as CEO in 2004, when Temasek was already on the decline due to the Asian financial crisis and the global economic recession after 9/11. Although Ho Ching is controversial because of her identity as the wife of Singapore Prime Minister Lee Hsien Loong, under her leadership, Temasek truly embarked on the road of expanding its huge capital empire, opened up a transparent system of public financial reports, and accelerated its expansion. Temasek's net portfolio value has reached approximately US$280.4 billion (as of the end of March 2021), up from US$90 billion when Ho Ching took over.
Temasek has long been a well-deserved huge capital empire. According to its 2023 annual report, as of March 31, 2023, the net value of Temasek's investment portfolio is S$382 billion, mainly in the fields of transportation and industry, financial services, telecommunications, media and technology, consumption and real estate, life sciences and agricultural food, and multi-industry funds. In the fields of telecommunications, media and technology, Tencent, Alibaba, and Meituan are its main investment representative projects. In the field of financial services, BlackRock, Mastercard, PayPal, Industrial and Commercial Bank of China, Construction Bank, Ping An Insurance, Standard Chartered Group, and DBS Group are all its main investment projects.
With the investment philosophy of leading social development trends, Temasek officially joined the blockchain and Web3 wave around 2018. It not only invested in this field but also cooperated with partners to establish blockchain companies.
According to public reports, at the end of 2018, Temasek had invested in enterprise blockchain software company and global banking alliance R3, while its venture capital arm Vertex Ventures made a strategic investment in Binance (the official website shows that it has withdrawn).
At the same time, Temasek identified blockchain and artificial intelligence as "foundational technologies" that can achieve global digital disruption, and formed a corresponding team to develop them. Mr Pradyumna Agrawal, then Managing Director of Temasek Investment (Blockchain), gave up his directorship in Temasek's financial services investment team and formally formed a blockchain team to establish Affinidi, which focuses on portable and verifiable digital identities and certificates.
In general, Temasek mainly invests in mid- to late-stage projects. For early-stage projects, Temasek established the early Web3 venture capital fund Superscrypt in 2022. Superscrypt operates independently and focuses on investing in infrastructure and emerging use cases, such as wallets, identities and credentials, developer tools, data indexing and search, expansion and privacy.
Up to now, according to the statistics of the crypto data platform RootData, Temasek has announced nearly 7 investments in the blockchain field. Most of the investments are well-known projects in the crypto field, including FTX, FTX.US, Amber Group, Immutable, ConsenSys, Animoca Brands, etc. Temasek is the lead investor in Animoca Brands, Immutable, and Amber Group.
Superscrypt, an early Web3 venture capital fund under Temasek, has a faster investment pace. Since its establishment in 2022, it has invested in nearly 20 projects, most of which are infrastructure projects, and representative projects include Aptos and Safe. It is worth mentioning that after the FTX crash, Superscrypt's investment pace has not slowed down significantly. Since 2023, it has made 12 investments, basically 2-4 per month.
In addition, Temasek also held approximately $2.1 million in Coinbase shares in the third quarter of 2021, but then sold all of them in the fourth quarter. In addition to participating in Binance's strategic investment in 2018, Temasek's Vertex Ventures also led a $4 million financing for the decentralized identity project Carv at the end of 2022.
In establishing blockchain companies, in addition to the aforementioned Affinidi established in 2018, which focuses on portable and verifiable digital identities and certificates, Temasek also co-founded the blockchain platform Partior with JPMorgan Chase and DBS Bank in 2021, dedicated to improving the pain points of global cross-border payments. Currently, blockchain, artificial intelligence, cybersecurity, data and digitalization, and sustainable solutions together constitute the "Temasek Operating System" to drive innovation and growth in the Temasek ecosystem.
However, despite actively participating in the development of blockchain, Temasek also stated in a statement on its official website that the rise of blockchain and digital asset industries has brought countless opportunities as well as huge risks. This is why Temasek decided to take a two-pronged approach in the blockchain field, by creating companies and investing.
Regarding the blockchain sector, Temasek said:
In creating blockchain companies, Temasek focuses on programmable currencies, digital asset tokenization, and decentralized identity and data. Some of these entities are not currently blockchain-based, but rely on the technology and focus on implementing open data solutions and open networks.
In terms of blockchain investment, Temasek mainly focuses on: financial market service providers, providing protocol-agnostic and market-neutral investments in the digital asset sector; and technical infrastructure, including protocols, wallets, developer tools, cross-chain messaging, the metaverse and gaming infrastructure.
Failure of $275 million and the start of venture capital accountability
It was probably the investment in FTX that really made Temasek active in the crypto space. But it was also this investment that damaged Temasek’s reputation and started the accountability system for venture capital.
According to Temasek's official statement, Temasek has invested approximately US$275 million in FTX and FTX US. In two rounds of financing from October 2021 to January 2022, it invested US$210 million in FTX, holding a minority stake of approximately 1%, and invested US$65 million in FTX US, holding a minority stake of approximately 1.5%. The cost of its investment in FTX accounts for 0.09% of Temasek's net portfolio value of S$403 billion as of March 31, 2022. After FTX's collapse, Temasek wrote down all of its investments. According to Forbes statistics, Temasek, Sequoia Capital, and Paradigm are the three investment institutions that suffered the most losses in the FTX incident.
Because FTX has been exposed for so many scandals, Temasek, as a core investor and with the nature of its state-owned capital, has also been strongly held accountable. At the end of November last year, the Singapore Parliament held a special discussion on the failed investment in FTX by Temasek, a holding investment company supervised by the Singapore Ministry of Finance.
Singapore's Deputy Prime Minister Lawrence Wong even denounced in Parliament that what happened at FTX not only caused financial losses to Temasek, but also damaged its reputation. Lawrence Wong revealed that after announcing a write-down of up to US$275 million in FTX investments, Temasek also officially launched an internal review, and this review will be completed by an independent team to "study and improve its processes and learn lessons for the future." , the team will report directly to the board of directors, which is also an "upgrade" to Temasek's regular review procedures.
Since the FTX investment took place during Ho Ching’s tenure, she also responded on Facebook: “FTX is not a problem of market volatility. It reminds us that having good goals is not enough. We also need to keep a clear mind about the risk assessment.”
In its statement reviewing its investment in FTX, Temasek stated that its investment logic for FTX is to invest in a leading digital asset exchange that uses a transaction fee model as a source of income, without transaction direction and balance sheet risks, which provides us with protocol-neutral, market-neutral exposure to the crypto market. It added, "There is a misunderstanding in the market that our investment in FTX is an investment in cryptocurrency. It should be clarified here that Temasek currently has no direct investment in cryptocurrency." As for its due diligence process, Temasek said it took about 8 months from February to October 2021 to investigate its financial, team and regulatory risks.
At the end of May this year, the chairman of Temasek issued a statement on the results of the internal review of FTX's investment transactions. In short, all investments are risky, and FTX concealed information from investors including Temasek and committed fraud. The Temasek investment team did not engage in misconduct in the process of making investment recommendations. However, despite the absence of misconduct, the investment team and the senior management responsible for the investment decisions took collective responsibility and collectively reduced their salaries. To a certain extent, Temasek has opened up the accountability system for venture capital.
Announcing the suspension of crypto investment, are you really going to get out of this unscathed?
The collapse of FTX was a major turning point for Temasek to tighten its crypto investment. Temasek has now made it clear that it does not currently intend to invest in cryptocurrency companies amid regulatory uncertainty in the cryptocurrency industry. Temasek has indeed not announced any crypto investments since the collapse of FTX. The last investment was in the blockchain platform Partior announced in November 2022. As mentioned earlier, Partior is also a subsidiary of Temasek, JPMorgan Chase, and DBS Bank.
Although Temasek has temporarily withdrawn from cryptocurrency investment, it has not made any further statement on whether its independently operated early Web3 venture capital fund Superscrypt has also suspended crypto investment. Superscrypt has made 12 investments since 2023, with the most recent investment announced on June 30, and even 4 investments in June. Superscrypt has also been relatively low-key. In addition to the dynamics of investment projects, there are almost no statements on its crypto views on its official website and Twitter.
In fact, Temasek has always been cautious about crypto investments. In 2021, Robert Gutman, CEO of New York Digital Investment Group (NYDIG), and the founder of Real Vision revealed that Temasek has begun to buy Bitcoin, especially Bitcoin directly from miners. But then Temasek stated that it does not own Bitcoin, but is actively involved in blockchain investment and is looking for emerging opportunities in the industry. Recently, when announcing the 2023 financial report, Temasek Chief Investment Officer Rohit Sipahimalani reiterated that we have never thought about investing in cryptocurrencies.
In addition to repeatedly denying direct investment in cryptocurrencies, Temasek has also repeatedly denied investing in some crypto companies. For example, in 2018, Temasek denied participating in Bitmain's pre-IPO financing. In May this year, Temasek also issued a statement denying that "Array, a developer of algorithmic currency systems based on smart contracts and AI, received a $10 million investment from Temasek at a valuation of over $100 million."
In addition, in the past two years, there have been no confirmed reports about Temasek's participation in investing in crypto investment funds. For example, there were reports that Temasek and giants such as Google and Blackstone jointly established a blockchain fund with a scale of tens of billions of dollars, and participated in the $500 million crypto venture fund of venture capital institution Hack VC, but in the end, nothing happened.
Today, Temasek announced its temporary withdrawal from crypto investment when it released its annual report for the 2023 fiscal year. This may warn us that the often-hyped narrative that traditional conglomerates will enter the crypto market and bring huge capital pumps is likely to be a fantasy at a time when crypto’s own technological innovation is limited and regulation is not perfect.
