Temasek eyes openings in emerging technologies such as blockchain, AI amid market volatility
Singapore’s state investor is identifying ‘pain points’ in markets that present sizeable and scalable opportunities
CRYPTOCURRENCY and blockchain-related assets are gaining traction among investors, both retail and institutional. Although state investor Temasek is expressing interest in these areas, it is opting to focus on the “highest-quality projects”, managing director of blockchain investments Pradyumna Agrawal said.
In an interview with The Business Times, he said that although there is now “a lot of noise” in the cryptocurrency space, Temasek still has a “degree of conviction” about the technologies and opportunities in the nascent sector.
“We are very careful about doing our diligence on both reputation and solutions. (Temasek) will typically invest in impact companies which are committed to regulatory compliance,” he said, adding that the company will ensure it is “comfortable” with the various risks associated with its investments.
In particular, Temasek is optimistic about areas such as blockchain and artificial intelligence (AI) – both of which have had “proven benefits” over the recent years and emerged as “high conviction” technology areas.
For instance, Marketnode – Temasek’s joint venture with the Singapore Exchange – uses smart contracts as well as ledger and tokenisation technologies to improve capital markets workflows.
Agrawal said over-the-counter (OTC) and fixed-income segments are “very large asset classes”, with trillions of dollars of issuances. These segments were, however, not efficient.
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Digitalising certain processes or using tokenised depository solutions for OTC and fixed income can allow several parties to “do a lot more” with the assets. Some benefits include less capital consumption during clearing and settlements, or better usage of collaterals.
The company’s investments in such technologies began four or five years ago, with investments into cybersecurity-related players. The company then moved into the likes of blockchain and AI.
“(AI) was almost like a completely new technology with far-reaching implications, but no one had really cracked it at that point of time in terms of the application areas,” said Agrawal.
In the blockchain sector, Temasek looked at application areas and technologies that would help it play a “catalysing role” in the industry. A broad area like technology can be further broken down into sectors like blockchain, insurance and fintech.
But solving a problem on a global level is not easy. For instance, Agrawal said payments is an easy area for Singapore, as “everybody is on the same network”. But on a global level, there are many payment systems and institutions that are not well connected.
In that scenario, competing institutions have to be on a common platform. This would require, for example, upfront investments to create the infrastructure, the ability to attract talent, and credibility with regulators – the very areas Temasek can help with, said Agrawal.
Temasek has a number of efforts in the blockchain space, and these have helped to improve business processes and operations in various ways.
One example is Trustana, a cross-border business-to-business marketplace of verifiable traders. The platform’s technologies gives companies of all sizes access to the international import and export markets, and enables buyers and suppliers to source for and sell products globally.
Agrawal said Temasek will continue to be strategic in terms of investments in these areas, and reckons demand for blockchain and AI solutions will continue to grow.
“We don’t want to be reinventing the wheel anywhere. If something is already solved and solutions already exist, then we won’t be spending time on that,” he said, adding that Temasek will seek to find “pain points” that present a sizeable and scalable opportunity.
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