Impact of FTX's Bankruptcy on Singapore's Financial Markets, Regulation of Asset Classes and Strategies of Investment Entities

Dr Lim Wee Kiak asked 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.

Miss Cheryl Chan Wei Ling asked 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.

Mr Zhulkarnain Abdul Rahim asked the Prime Minister 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.

Mr Saktiandi Supaat asked 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' ongoing consultation in relation to consumer harm from cryptocurrency trading; and (d) if so, how.

Ms He Ting Ru asked 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.

Mr Dennis Tan Lip Fong asked 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.

Mr Melvin Yong Yik Chye asked 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.

Ms He Ting Ru asked 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.

Mr Lim Biow Chuan asked 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.

Mr Zhulkarnain Abdul Rahim asked the Deputy Prime Minister and Minister for Finance (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.

Mr Leon Perera asked the Deputy Prime Minister and Minister for Finance given that the Government does not direct GIC 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.

Assoc Prof Jamus Jerome Lim asked the Deputy Prime Minister and Minister for Finance in light of MAS’ proposed measures to reduce cryptocurrency trading risks, whether similar suggestions have been promulgated to Government-related investment entities, such as GIC and Temasek Holdings.

Ms He Ting Ru asked 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.

Assoc Prof Jamus Jerome Lim asked 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.

Mr Gerald Giam Yean Song asked 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.

Mr Leon Perera asked 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 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.

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

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 gamechanger for a wide range of industries. This is why we are piloting specific use cases to test the possibilities in the financial sector.

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.

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.

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.

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.

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.

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

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.

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 which solicit Singapore customers without the requisite licence. MAS did not have reason to list FTX on IAL because there was no evidence that it was soliciting users in Singapore. This is unlike Binance, which was placed on IAL for actively soliciting users in Singapore without a valid licence and is being investigated presently by the Commercial Affairs Department (CAD) for possible violation of the Payment Services Act.

This does not mean that all entities which are not listed on 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.

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.

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. 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.

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.

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.

Statutory Boards have specific mandates and functions. They are not investment entities, but they have the flexibility to invest their surpluses and 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.

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. 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.

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

One of the areas Temasek and GIC's private equity arms 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 startups will fail, while a few will prove successful and grow into industry leaders, like Tencent or BioNTech.

The skill of venture capitalists lies in discerning the promising projects and backing them. Risk-taking is an essential part of such investments.

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 the investee companies closely, but no amount of due diligence and monitoring can eliminate the risks altogether.

Insofar as blockchain technology is concerned, Temasek and GIC have some investments in the digital assets space, but they have 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.

What happened with FTX, therefore, has not only caused a 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.

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 of March this year, has generated an internal rate of return in the mid-teens over the last decade, better than industry averages.

The FTX loss will also not impact the Net Investment Returns Contribution (NIRC), as the NIRC is tied to the overall expected long-term returns of our investment entities and not to individual investments.

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.

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.

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.

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 references. 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.

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.

I thank the Deputy Prime Minister for the comprehensive reply. I just have two questions.

One, may I ask if FTX is the only cryptocurrency-related investment that the three investment entities are exposed to?

Two, despite the failings of cryptocurrencies, the blockchain-based digital infrastructure may still prove to be useful in other aspects. So, may I ask, for these investment entities, whether they have been or will continue to invest in such companies and, if they have been, how has the investment performance been so far?

Sir, I mentioned just now that both GIC and Temasek do have exposures to new technologies and early-stage companies. These investments are within the overall context of the risk parameters set out by the Government.

So, in GIC's case, it has a broadly diversified global portfolio. Within that, it has limited exposure to early-stage companies. Temasek is, largely, an equities investor. And within that space, it has exposure to early-stage companies, but Temasek itself has put out a statement to explain that its exposure to early-stage companies is about, presently, 6% of its overall portfolio. For both entities, this exposure to early-stage companies would include investments in digital assets, but it would be diversified to a broad range of different sectors.

So, to answer the question: yes, there will be other companies in the digital asset space that GIC and Temasek have invested in, but they are within these limited parameters. So, if we talk about concerns of a broader fallout, I think that it would be relatively contained.

But, as the Member has highlighted, there may be promising use cases in blockchains. It is still too early to say. But as I have mentioned in my reply, some of the earlier optimism about blockchains has proven to be too optimistic. Remember, a few months ago, there was a lot of enthusiasm. Even within this House, Members were suggesting for MAS to move faster. And MAS was being criticised for being too slow. So, that general enthusiasm has proven to be overly optimistic.

Will there be specific use cases where blockchain technologies can be applied and be promising? Well, we are pursuing pilots in MAS, specifically in the financial sector. And the investment entities themselves, therefore, will have to do their own due diligence in analysing each particular case that comes up and consider whether or not to invest in these projects.

Thank you, Mr Speaker. I would like to thank the Deputy Prime Minister for his assurance of the limited exposure to NIRC. I would like to ask specifically one supplementary question on the whole-of-Government's investment risk management capability.

I think that given global banks' exposure to digital assets and some exposure to cryptocurrencies, does an investment entity like MAS, for example, do they build in the risk to cryptocurrencies and digital assets blowing up as part of their worst-case scenarios in their stress test scenarios? For example, for financial institutions and non-bank financial institutions, especially on cryptocurrencies' downside risks worst-case scenarios. It is quite important, given that the systemically important institutions may have ramifications on Singaporeans in general.

Sir, we do take that into account in our stress tests. As I mentioned just now in my reply, MAS has assessed and determined that for the financial sector itself, financial institutions based here in Singapore, our exposure to cryptocurrencies and the digital assets is very limited. But we still apply these stress tests, not just to Singapore's institutions, but to the broader global operating environment to determine how this will impact Singapore's financial institutions.

This is part of our continued risk monitoring, not only for MAS and the financial sector, but also for the Government's overall investment portfolio.

I thank the Deputy Prime Minister. I have two supplementary questions.

Firstly, where are the risk tolerance levels spelt out to Temasek, GIC and MAS? Are they published anywhere? And under current statutes and regulations, are Temasek, GIC and MAS free to invest in anything they want to, as long as their own boards or management teams approve them and they fall within the risk tolerance level?

Secondly, does the President have any say in the setting of investment parameters, mandates, objectives or risk tolerance levels of the investments by Temasek, GIC and MAS?

Sir, I think it is important to understand the system that we have. The keys to any successful long-term reserve management systems are governance, professional management and a long-term horizon.

In our case, we have put in place a very strong governance process and system, where the Government is a shareholder – we do not micro-manage, we do not decide on investments, we do not prescribe asset classes or assets – but we have a role in appointing board members, senior management and we hold them accountable to delivering good, long-term performance. And the President is part of this governance process, too, because she, in terms of the appointments of people, has the powers as well.

So, within that governance system that we have in place, there are processes, there are risk metrics to monitor, there are clear accountabilities. And it is a system that has worked well over the decades and has delivered good long-term outcomes for Singapore.

Thank you, Mr Speaker, Sir. Just a few questions for the Deputy Prime Minister. Firstly, if I heard the Deputy Prime Minister correctly in his earlier statement, he said, with respect to the sovereign wealth funds, the Government is not prescriptive, it does not prescribe assets and asset classes. But he also said that the Government monitors the portfolios, if I heard him correctly, for geographic diversification and downside risks.

I am just a little curious how those two things are reconciled. What kind of discussion will the Government have, if it monitors those risks and diversification and feels that they are off? Does the Government actually intervene and would that not then be prescriptive if such a situation arose? I was just hoping the Deputy Prime Minister could expand on that.

My second supplementary question is on the rotational audits by the Auditor-General's Office (AGO). I thank the Deputy Prime Minister for confirming that GIC is subject to AGO audits, but Temasek is not. I would just like to ask why that is the case, since they are both managing public funds. It could be argued that Temasek has the legal form of a private company but, against that, I would say that right now, AGO does audit Ministries and Statutory Boards that own private companies, for example, MOH Holdings or EDB Investments, and presumably those companies under a Statutory Board are also subject to rotational audits by AGO. So, the fact that Temasek is a private entity should not, in and of itself, mean that it does not need to be subject to rotational audits by AGO.

My last supplementary question is really, would the —

Sir, before answering Mr Leon Perera, I forgot to reply to Mr Gerald Giam's question on the publication of the risk limits. These are published in the following sense. For example, the risk tolerance, the amount of risk that the Government has set out for GIC is expressed in our reference portfolio 65/35. That sets out the kinds of risks that the Government is prepared for GIC to take and, therefore, GIC, as an active manager, publishes its performance with regard to that risk and the performance that it tracks with regard to the referenced portfolio.

Likewise, in Temasek's case, it is different. It is not a portfolio manager. It is largely an all-equities investor. But in its annual Temasek Review, Temasek will put out some of its risk considerations and its risk parameters. So, to the extent that these risks are disclosed, the investment entities do have disclosures through their respective platforms – largely through their annual reports.

On Mr Leon Perera's question on how do you square the monitoring of assets, geographies and all that, with the policy of leaving the boards to make their own decisions, well, we do it because monitoring is not prescribing. We monitor the portfolios, we get data, we get information, we monitor them, we subject these portfolios to stress tests, given something that collapses in an extraneous event that takes place, a crisis, a fallout in cryptocurrencies. We subject them to rigorous stress tests to make sure that the overall portfolio, even under these stress tests, does not have significant losses beyond the threshold that we think would be too much.

So, we monitor. And if, indeed, the stress tests show that there is too much risk being taken or concentration of a particular asset that may lead to some vulnerabilities, then we provide feedback to the entities. They have the discretion then to take the necessary actions, to adjust. So, that is how we operate; not by prescribing but monitoring and setting in place overall risk parameters from which our entities operate.

On audit, it is not unusual at all for private auditors to audit even public agencies. Statutory Boards themselves are subject to commercial auditors, private auditors, not to the Auditor-General. So, unless we are suggesting that somehow these private auditors are not as good as the Auditor-General, I do not see any reason why. It is not unusual that the Auditor-General has a remit, largely within the Public Service and Government Ministries. But for some Statutory Boards, for a commercial entity like Temasek, which also, within it, has a portfolio of listed entities, well, I think we should let commercial auditors do their job. And so far, they have been doing a very good job.

Thank you, Speaker. I would like to ask the Deputy Prime Minister, based on the recent reports on the FTX collapse, it seems to suggest that there are weak governance controls on the moving of customers' funds. There really is not any obligation to put funds into trust accounts in banks for safeguarding because digital assets are mainly on chain and not in the vault.

I note that the Deputy Prime Minister mentioned that there is now a consultation on reviews of regulatory approaches. I would like to ask if MAS is looking into regulating digital assets' custody to mandate Web3 companies to put customers' digital assets into licensed custodians that perhaps use multi-party computational wallets to manage these funds and would need the asset owners' approval before the moving of such funds. This could help to reduce the risk of misuse of digital assets.

Sir, as I mentioned in my reply, there is an ongoing consultation process. Part of the proposal covers some of the things that the Member has talked about.

MAS is looking into segregating customers' assets from the company's own assets so that there is a very strict prohibition from lending out of customers' money, which was what happened in the case of FTX.

MAS is also looking at one of the proposals to ensure that the DPT service provider does not operate a separate trading platform that simultaneously takes proprietary positions. So, these are some of the considerations.

We will finalise these proposals after the consultation. There may be more feedback, including suggestions from Members, which MAS will study. But, as I said in my reply, no amount of regulation can eliminate all the risks. Even if a platform is well-run, well-managed, the cryptocurrency itself has no intrinsic value. It can go all the way to zero and people who want to trade in that must be prepared to lose all their money.

Sir, I agree with the Deputy Prime Minister that we should leave the fund managers of our sovereign funds to run the funds independently. However, because the reserves are the money of the people, accountability is important. And especially in a case like FTX, there are many unanswered questions. So, I have two questions for the Deputy Prime Minister.

One, the Deputy Prime Minister has answered that the investment guidelines are available in separate places, like in the report of Temasek and in some places for GIC. These are things that Singaporeans would like to know. So, will the Government in the future prepare all these guidelines in a consolidated place so that Singaporeans know the investment strategy and the guidelines guiding the investment of our sovereign funds?

Secondly, in relation to the FTX case, has MOF, under the current governance structure, received any reports from Temasek? This is my first question.

Thank you, Sir. I will answer all three questions and indulge Mr Leong Mun Wai.

On the first question whether we might consolidate all the information, well, they are just three entities. Actually, more like two, because MAS is quite unique. It is a central bank. Its investments are really in very conservative instruments. So, really, there are just all of two entities. There is not much to consolidate. If you think about it, go to the GIC website, go to the Temasek website. All of the information is there. If Members think it is useful, MOF can put up links on our website to both websites, so that you can refer to them at your own pleasure and your own time.

On the second question, on their reports, yes, Temasek has provided an update to MOF on its findings. These were subsequently published by Temasek itself. It is very unusual, first of all, for Temasek or GIC for that matter, to comment on individual investments – they do not, as a normal practice. Because we should not get into the habit of looking at individual investments in retrospect. There will always be ups and downs, and there will always be successes and failures in investments.

So, as a matter of practice, GIC and Temasek, in fact, do not put out any information on specific individual investments.

But in this case, precisely because of the unique circumstances leading up to it – because from Temasek's point of view, it recognised that it has incurred reputational damage – Temasek decided to put out a statement disclosing the circumstances leading up to its investment decision, why it had done all the due diligence and, despite the due diligence, found reasons to still proceed with the investment. All of that is on the Temasek website, including a series of FAQs. So, all of that is available on the Temasek website.

The third question, I have answered that, too.

Thank you, Sir. The Deputy Prime Minister in his reply talked about the over-optimism in the earlier stages of the crypto developments. We also know that many financial centres like Dubai and Hong Kong are all aspiring to be the cryptocurrency hub.

I want to ask the Deputy Prime Minister whether the Government sees hubbing the cryptocurrency trading activities in Singapore as necessary to strengthen our position as a financial centre. What are the possible economic use cases here?

Sir, we are not planning to hub crypto activities here. We have always looked at how we can be a responsible and innovative digital asset player and the focus is on "responsible" and "innovative". Where innovation is concerned, as I mentioned just now, some of the earlier optimism about blockchain technologies has been proven to be not well-placed. I think there is now a more realistic sense of what these technologies can do. We are now continuing with pilot projects on payments, on capital markets, on settlements, to work out what are the promising use cases for such technologies. That we will continue to do.

And within that context, there may be a role for DPT service providers. But if these DPT service providers do exist in Singapore, are licensed here – and DPT service providers would include exchanges for cryptocurrencies and tokens – then they will be licensed. As I have highlighted, MAS has published, even before the FTX collapse, a series of consultation papers with tighter regulatory measures. After our consultations, we will want to put in place these tightened measures for the licensed entities.

Thank you, Mr Speaker, Sir. I just have one supplementary question for the Deputy Prime Minister on his reply to my earlier supplementary question. So, it is just one, you can count me on that.

Of course, Ministries, Statutory Boards are subject to commercial external auditors and that includes the private companies under them. And GIC is also subject to commercial external auditors, as is Temasek. But Ministries, Statutory Boards, GIC and the private companies under Ministries and Statutory Boards are also subject, on top of that, to the Auditor-General's audits. So, why is it then that Temasek is not subject to the Auditor-General's audits?

Sir, not all Statutory Boards are subject to the Auditor-General's audits. But, in fact, where there are issues that come up – could be in a Town Council, it could be in a Statutory Board, it could be in Temasek – if there are reasons, we will have no hesitation to ask the Auditor-General to go in to do a full audit.

Thank you, Mr Speaker, I had filed two Parliamentary Questions (PQs) on how the Government manages these two investment entities – GIC and Temasek. I do not believe they have been answered in the Minister's answer earlier.

Firstly, when there are huge investment losses, does MOF demand internal and external investigations, just to make sure that there is no evidence of negligence or misconduct?

Secondly, does MOF benchmark the performance of Temasek Holdings and GIC against other comparable funds, like other sovereign wealth funds? If so, which funds are these and how do they compare?

Sir, I did mention briefly in my reply just now that when it comes to performance management, we do assess and monitor closely the long-term performance of our investment entities. The published references are the GIC Reference Portfolio as well as the MSCI equities indices, which are published by both GIC and Temasek respectively.

If you look at both entities' performance vis-à-vis these reference points, they have done well, in fact. It is all published information. They have done well over the long term.

We also track the performance of other fund managers. That is more internal. But in fact, many of these fund managers' performances are published. Anyone can look at how private equities have done – top quintile, top quantile – asset managers, how they have done over the long term. That information is published. So, anyone can look at that data and compare that with GIC and Temasek's performance, which is also published.

The facts remain that even after comparing GIC and Temasek with other leading institutional investors, our two investment entities have done well, creditably, amidst a more challenging investment environment. So, that is for performance management.

On losses, whether or not we require specific audits or reviews to be done, losses happen all the time as part of the investment process. So, you have to really take that into consideration and look at the overall portfolio rather than look at each individual project that does not do well. As I mentioned just now, if you look at the overall portfolio for both Temasek and GIC, their performance has been creditable and, in fact, in many instances, above industry averages.

But in this case, because it is such an exceptional situation, it has gotten so much publicity, it has also impacted Temasek reputationally, Temasek itself has undertaken its review, it has put out information and it has taken the extra step of doing a further review; which it has also said it will do – an internal review, led by an independent team reporting to the board, with the purpose of looking at how it can learn from this experience and improve its own processes.

Thank you, Mr Speaker. I have two supplementary questions. First, the Minister shared that licensed DPT service providers are required to put in place a risk assessment test, among other things. However, as such measures have yet to be put in place, unlicensed service providers, such as FTX, could still have conducted business activities in Singapore with our retail customers. How does the Government intend to address this gap?

Second, I note that Temasek's investment in FTX, at US$275 million, was a small percentage of their overall portfolio. However, given the concerns around the viability of blockchain and crypto-related industries, will the Minister be willing to share what is the number of companies' dollar value and percentage exposure to service providers and technology infrastructure players related to blockchain and the digital asset space to assure Singaporeans, especially when The Straits Times reported on 24 November that GIC is an investor in the group, with ties to troubled cryptocurrency broker Genesis Trading?

Sir, on the first question, the gap in regulations will exist, no matter what we do. Even if we have a very comprehensive system in Singapore, it does not stop Singaporeans from going overseas or going online to overseas platforms to invest in cryptocurrency. This is not going to stop that from happening.

I think what we should do is focus on what are reasonable regulations, learning from the recent experiences and put in place a sound regulatory system but, at the same time, continue with the reminders and public education we have been doing all this while for so many years. We will step up our efforts there to let people know the risk of investing in cryptocurrency, that this is highly volatile, it has no intrinsic value; and, really, anyone who does this has to go in with their eyes open.

On the second question, I have already actually answered that in the context of Ms Tin Pei Ling's first supplementary question, setting out the investments that our investment entities make in this digital asset space within the context of their holdings in early-stage companies. We do not go beyond that because we do not go into specific company investments. But within that broad context and the parameters I have set out, I hope Members are assured that the exposures are limited and it is within the context of a very well-diversified portfolio, which will then allow us to still earn good returns on other projects, even though there may well be a few projects where there are losses. But that is the whole point of diversification in investments.

Thank you, Mr Speaker. I thank the Deputy Prime Minister for the clarifications. I do appreciate and understand that losses are part and parcel of the investment landscape. I do not think anyone questions when Temasek makes money. And it is not an easy job. But there are two fallouts to this particular collapse of FTX.

One is on the retail investors. There are scammers, opportunists taking advantage of the situation, setting up websites for people to come forward to make claims. Would MAS be looking into how to protect our Singaporean retail investors in this regard?

Secondly, the Deputy Prime Minister talked about reputational damage to Temasek, especially given the fraud allegations in the particular collapse, even with the write-off. Would Temasek be looking to reserve its rights to make any particular claim, should the need arise?

Yes, to the second question. I am sure Temasek is on top of this and will reserve its rights to do so.

On the first question, there are scammers. We are concerned about that. Whether it is in the crypto space, whether it is SMS – there is a whole range of different scams. That is why we have set up a task force specifically on scams and we will do whatever we can to address this problem.

Thank you, Mr Speaker. I thank the Deputy Prime Minister. Just following up on the Deputy Prime Minister's replies to some of the supplementary questions. With regard to Temasek's independent review of the FTX imbroglio, this independent review, is it an external one, external to Temasek, or is it internal, a Temasek team reporting on Temasek's investment in FTX?

The second question is, what thresholds must be crossed before AGO steps in to audit a Temasek investment or Temasek investment process in a company?

Sir, this Temasek review that it has initiated is an internal one. It will be led by people who are separate from the investment team that made this decision. So, they will be separate, they will not be clouded by what steps were taken and they will report directly to the board, as I mentioned just now.

What further actions might MOF, as shareholder or Government, take? Is this sufficient in this case or what thresholds will be reached in order for us to trigger further action? Quite aside from this case, for which Temasek is doing its part and is pursuing this review, which I would add, separately, that it does this for FTX, but it actually also has done this in the past before when there are similar instances. It does not happen very often. But when there are instances where, for example, there is a write-off in an investment project, where there is a permanent impairment and it is an investment that did not go well, then they would initiate something like this. They have done this before and that is what they are doing again. It is a step-up from their usual review process, which applies to all investments. In this case, as has happened in the past, Temasek feels that this is a significant project and there is something to be learnt from the experience, so, they are undertaking this separate review.

Will we go beyond such a separate review to call in external auditors, for example? I think it is the question that the Leader of the Opposition raised. Certainly, the Government will not rule out doing so, but it is not just a matter of an investment loss. It would be something that we feel has gone wrong within the organisation, possibly there might be negligence, there might be fraud, there might be misconduct. So, it has to be of that significant threshold for us to say, "Look, something is not right within the organisation; let us commission or get the Auditor-General to go in and do a proper audit and investigation". And we will not rule out if something like that were to happen.

I thank the Deputy Prime Minister for his comprehensive answers. Sometimes, in these situations, the mood among investors and investment-related decision-makers can change as the narrative shifts. Can I ask whether the Deputy Prime Minister foresees the possibility that investors and investment entities will shy away and have a chilling effect on their appetite for high potential, long-term investments that, nevertheless, have good fundamentals? Because in the Science and Technology sector, there have been investments and developments with a long horizon that bore fruit many years later – whether it was the vaccines that allowed us to fight COVID-19, whether it is monoclonal antibodies that took years to become viable treatments for diseases and so on.

Thank you. That is precisely the advantage that we have as investors. It is a very important strategic advantage that GIC and Temasek have. To have that long-term perspective and not just to focus on the short-term or follow and chase after fads; and then, if the market cycle comes down, you quickly sell your assets and cut your losses.

That is not something we want to do. We want our entities to have that long-term horizon, invest within the risk limits, invest in some new technologies, some early-stage companies, recognising that, as I said just now, many startups will not do well, but a few might eventually prove to be wildly successful and become giants in their own right. So, there is a place for that.

Our investment entities do recognise this and there is an appropriate allocation in their portfolios for such investments. And they will continue to take such risks. But I hope everyone in this House recognises this. And that is why it is important we insulate our investment entities from these political pressures and let them do their jobs well, commercially and professionally, as they have been doing all these years.