THE proposed measures for digital payment token players cannot stop crypto platforms from collapsing or customer losses, said Deputy Prime Minister and Finance Minister Lawrence Wong on Wednesday (Nov 30).

The Monetary Authority of Singapore (MAS) released in October a consultation paper on reducing risks for retail investors dabbling in cryptocurrency. The proposed measures include segregating customers’ assets from company assets, and not allowing customers to purchase cryptocurrency with credit.

Responding to questions in Parliament on Wednesday over the collapse of cryptocurrency platform FTX, Wong said that cryptocurrency platforms can collapse due to fraud, unsustainable business models or excessive risk-taking.

Well-run and managed cryptocurrency platforms are also not immune to a collapse, due to the volatile nature of cryptocurrencies, coupled with them having no intrinsic value.

“Those who trade in cryptocurrency must be prepared to lose all their value, no amount of regulation can remove that risk,” said Wong.

Regulation will also not stop Singapore retail investors from using overseas crypto exchanges to invest in cryptocurrency. Instead, the focus will be on reasonable regulations with learnings from the recent experiences and continued reminders and public education, said the minister.

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The collapse of FTX and other cryptocurrency platforms should help in rationalising the space, and the government is monitoring the unfolding repercussions on the global cryptocurrency ecosystem.

The spillover impact on Singapore’s financial system is limited as key financial institutions have insignificant exposures to cryptocurrencies and crypto players, according to MAS.

Wong reiterated that the government and MAS have drawn a distinction between growing an innovative and responsible digital assets ecosystem and speculation in cryptocurrency, which they have discouraged the retail public from participating in.

Singapore is also not looking to hub crypto activities, noted Wong; instead, it has always looked at being a responsible and innovative digital asset player.

“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,” added Wong.

Instead, Singapore will continue with pilot projects on use cases, such as payments to capital markets, to work out the promising use cases for blockchain technology.

The collapse of FTX has caused not just financial loss, but also reputational damage to state investor Temasek. This resulted in Temasek releasing a comprehensive statement explaining its due diligence process and circumstances 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,” said Wong.

The FTX write-off will not impact the net investment returns contribution, and Temasek’s early-stage portfolio as at March 2022 has generated an internal rate of return in the mid-teens over the last decade. The early-stage portfolio consists of 6 per cent of Temasek’s overall portfolio.

Wong also defended the governance structures at Temasek and GIC, following Members of Parliament suggesting more guidelines and safeguards. These structures are more extensive than those of a typical company, he noted.

Temasek is audited by commercial auditors, while GIC is audited by the Auditor-General. Wong added that both entities are subject to the President’s oversight of their budget and key appointments.

“There is therefore no need for additional audit requirements or Parliamentary Committees. Instead, we should insulate the boards from political pressures,” he said.