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Why Temasek is backing away from crypto-related companies

Singapore’s state-owned investment giant Temasek has recently announced that it is dropping its plans to invest in crypto exchanges, citing regulatory uncertainties and market conditions as the main reasons. This decision comes after the company suffered a huge loss from its investment in the now-bankrupt crypto exchange FTX, which was involved in a fraud scandal.

Temasek is one of the largest and most influential investors in the world, with a portfolio of over $300 billion. The company has been exploring the potential of blockchain and crypto technologies for a long time, but has avoided investing directly in cryptocurrencies. Instead, it has focused on backing crypto service providers, such as blockchain infrastructure firms, digital asset custodians, and payment platforms.

However, Temasek’s venture into the crypto space has not been smooth sailing. In 2022, the company invested $275 million in FTX, a Singapore-based crypto exchange that claimed to offer fast and secure trading services. FTX was one of the leading crypto exchanges in Asia, with a daily trading volume of over $1 billion.

Unfortunately, FTX turned out to be a scam. In March 2023, FTX abruptly shut down its operations, leaving thousands of customers unable to access their funds. The exchange’s founder and CEO, Lee Sang-hoon, was arrested by the Singapore police for allegedly embezzling millions of dollars from investors and customers. Temasek had to write off its entire investment in FTX, which was a major blow to its reputation and performance.

Temasek’s Chief Investment Officer Rohit Sipahimalani said that the FTX investment was part of the company’s early strategy to explore new disruptive technologies and see what’s around the corner. He admitted that the company was very disappointed by the fraud situation and that it had learned from the experience.

However, he also said that investing in crypto firms will involve some level of risk, especially given the unclear regulations and market conditions. He noted that the US SEC has been cracking down on major crypto firms, such as Binance and Coinbase, for violating securities laws and consumer protection rules. He said that Temasek is not comfortable investing in exchanges until there is a clear regulatory framework and a suitable investment opportunity.

He added that Temasek is not completely against investing in crypto-related firms, as long as they are confident that their effects will be positive and their risks will be manageable8. He said that Temasek is still interested in supporting crypto service providers that can help improve financial inclusion, efficiency, and innovation.

Temasek’s decision to drop its plans to invest in crypto exchanges reflects the challenges and uncertainties that the crypto industry faces1. While crypto technologies have incredible potential for good and ill, they also need to be regulated and developed responsibly. As one of the most influential investors in the world, Temasek’s stance on crypto could have a significant impact on the future of the industry.

Disclaimer: This article was generated by Bing Chat.

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