Frustrated in the encryption field, setting the worst performance in 7 years, Temasek returned home

Author: flowie, ChainCatcher

On Tuesday, Singapore's sovereign wealth fund Temasek reported its worst performance in seven years. In the annual report for the 2023 fiscal year ended March 31 this year, the net value of Temasek's investment portfolio 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 rate was -5.07%, the worst annual performance since 2016.

Source: Temasek Review 2023 – Summary

**Although Temasek attributed the result to factors such as recession risk, rising interest rates and geopolitical tensions, its failure in the encryption field cannot be ignored. On the day the financial report was announced, Rohit Sipahimalani, chief investment officer of Temasek, said in an interview with CNBC that Temasek currently does not plan to invest in cryptocurrency companies under the uncertain regulation of the cryptocurrency industry. Sipahimalani also added, “We never thought about investing in cryptocurrencies. **Even by investing in FTX, we mean investing in the exchange, which allows us to earn fee-based income regardless of balance sheet risk or any transaction risk".

As the most influential national sovereign fund, Temasek's attitude towards encryption also has the meaning of a weather vane to some extent. From formally entering the blockchain through investment and entrepreneurship around 2018, to breaking $275 million on FTX, taking the lead in opening the venture capital accountability system, and announcing the temporary withdrawal of crypto investment today, is Temasek really in the crypto field? Want to return home without feathers?

The road to Web3 of the strongest state-owned enterprise in Singapore, both investment and entrepreneurship

Temasek was first established in 1974, and is 100% owned by the Ministry of Finance of the Singapore government. It is also the most well-known company wholly owned by the Singapore government. Temasek controls almost all of Singapore's most important companies with the largest turnover, including Singtel, Singapore Airlines, DBS Bank, and Singapore Metro. It can be said that it almost dominates Singapore's economic lifeline. However, although it is state-owned capital controlled by the government, the government follows market-oriented operations for enterprises that do not directly manage it.

An important turning point in the rise of Temasek was when Ho Ching became CEO in 2004. At that time, Temasek was already in decline due to the looting of the Asian financial crisis and the global economic recession after 9/11. Although Ho Ching has been controversial because of her identity as the wife of Singapore Prime Minister Lee Hsien Loong, under her leadership, Temasek has truly opened up the road to the expansion of a huge capital empire, opened a transparent system for public financial reporting, and stepped up the pace of expansion. Temasek's net portfolio value has risen from US$90 billion when Ho Ching took over to about US$280.4 billion (as of end-March 2021).

Temasek has already become a well-deserved huge capital empire. According to its 2023 fiscal year annual report, as of March 31, 2023, the net value of Temasek’s investment portfolio is 382 billion Singapore dollars, mainly in transportation and industry, financial services, telecommunications, media and Technology, consumption and real estate, life sciences and agricultural food, multi-industry funds and other fields. In the field of telecommunications, media and technology, Tencent, Ali, and Meituan are its main investment representative projects. In the field of financial services, BlackRock, MasterCard, PayPal, China Industrial and Commercial Bank, China Construction Bank, Ping An Insurance, etc., as well as Standard Chartered Group and DBS Group are its main investment projects.

Source: Temasek Review 2023 – Summary

Under the investment philosophy of leading the social development trend, Temasek officially joined the wave of blockchain and Web3 around 2018. Not only investing in this field but also cooperating with partners to establish blockchain companies.

According to public reports, at the end of 2018, Temasek had invested in enterprise blockchain software companies and global banking alliance R 3 , while its venture capital arm, Vertex Ventures (Xiangfeng Investment), had made a strategic investment in Binance (the official website shows that it has withdrawn).

At the same time, Temasek has identified blockchain and artificial intelligence as "basic technologies" that can achieve global digital disruption, and has established a corresponding team for development. Mr Pradyumna Agrawal, then managing director of Temasek Investments (Blockchain), relinquished his directorship in the Temasek Financial Services investment team and formally formed a blockchain team to create Affinidi, which focuses on portable and verifiable digital identities and certificates .

Generally speaking, in terms of investment, Temasek mainly invests in the top projects in the middle and late stages. For early projects, Temasek established Superscrypt, an early Web3 venture capital fund, in 2022. Superscrypt operates independently, focusing on investing in infrastructure and emerging use cases, such as wallets, identity and credentials, developer tools, data indexing and search, scaling and privacy etc.

So far, according to the statistics of RootData, an encrypted data platform, Temasek has announced nearly 7 investments in the blockchain field. The basic investments are all well-known projects in the encryption field, including FTX, FTX.US, Amber Group, Immutable, ConsenSys, Animoca Brands, etc. , and for Animoca Brands, Immutable, Amber Group's investments, Temasek is the lead investor.

Source: RootData

Temasek’s early Web3 venture capital fund Superscrypt has a faster investment pace. Since its establishment in 2022, nearly 20 investments have been invested, most of which are infrastructure projects, and representative projects include Aptos and Safe. It is worth mentioning that after the FTX thunderstorm, the investment pace of Superscrypt has not slowed down significantly. Since 2023, it has made 12 transactions, basically 2-4 transactions per month. **

Source: RootData

In addition, Temasek also held about US$2.1 million in Coinbase stock ownership in the third quarter of 2021, but then sold it all in the fourth quarter. In addition to participating in the strategic investment of Binance in 2018, Vertex Ventures (Xiangfeng Investment), a subsidiary of Temasek, also led the $4 million financing of Carv, a decentralized identity project, at the end of 2022.

On the establishment of blockchain companies, In addition to the establishment of Affinidi, which focuses on portable and verifiable digital identities and certificates, in 2018, Temasek will also jointly create a blockchain with JPMorgan Chase and DBS Bank in 2021. The blockchain platform Partior is committed to improving the pain points of global cross-border payments. At present, blockchain, artificial intelligence, network security, data and digitalization, and sustainable solutions together constitute the "Temasek Operating System" to promote the innovation and growth of the Temasek ecosystem.

However, although it is necessary to actively participate in the wave of blockchain development, Temasek also stated in its official website statement that the rise of the blockchain and digital asset industry has brought countless opportunities, but it also brings huge risks. This is why Temasek has decided to take a two-pronged approach in the blockchain field, laying out by creating enterprises and investing.

Regarding the focused blockchain field, Temasek said:

• In creating blockchain businesses, Temasek focuses on programmable currency, tokenization of digital assets, and decentralization of identity and data. Some of these entities are not blockchain-based at this stage, but rely on this 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-independent and market-neutral investment for the digital asset field; and technical infrastructure, including protocols, wallets, developers Tools, cross-chain messaging, metaverse and gaming infrastructure.

Lost $275 million, kicking off VC accountability

It is probably the investment in FTX that made Temasek truly active in the field of encryption. But it was also the investment that tarnished Temasek's reputation and kicked off accountability for venture capital.

According to Temasek’s official statement, Temasek invested approximately US$275 million in FTX and FTX US. In the two rounds of financing from October 2021 to January 2022, it invested US$210 million in FTX, holding about 1% of it. , and invested $65 million in FTX US, holding a minority stake of approximately 1.5%. The investment cost of its FTX accounted for 0.09% of Temasek's S$403 billion net portfolio value as of March 31, 2022. After the FTX thunderstorm, Temasek wrote down all its investments. According to Forbes statistics, Temasek, Sequoia Capital, and Paradigm are the three investment institutions that lost the most in the FTX incident.

Due to the fact that FTX was exposed to too many taints, Temasek, as a core investor, and the nature of its state-owned capital, were also strongly held accountable. At the end of November last year, the Singapore Parliament discussed the failure of Temasek, a holding investment company supervised by the Singapore Ministry of Finance, to invest in FTX.

Singapore’s deputy prime minister, Lawrence Wong, even denounced in Parliament that what happened to 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 investment, 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" of Temasek's regular review process.

Because the FTX investment occurred during He Jing’s tenure, she also responded on Facebook: “FTX is not a matter of market fluctuations. It reminds us that good goals are not enough. We also need to measure risks and keep Clear head."

Temasek stated in its FTX investment resumption statement that its investment logic for FTX is to invest in a leading digital asset exchange. The exchange uses the transaction fee model as its source of income and has no risk of transaction direction and balance sheet. This provides us with Protocol-agnostic, market-neutral exposure to the crypto market. And added, "There is a misunderstanding in the market that our investment in FTX is an investment in cryptocurrencies. What I want to clarify here is that Temasek currently has no direct investment in cryptocurrencies." Regarding its due diligence process, Temasek stated that it has never It will take 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 investment transactions. **In short, all investments are risky, and FTX concealed information from investors including Temasek, which is fraudulent. The Temasek investment team did not act improperly in the process of arriving at investment recommendations. But **despite no wrongdoing, the investment team and senior management responsible for investment decisions are collectively liable and collectively cut their salaries. **Temasek has opened up the accountability system of venture capital to a certain extent.

Declare to suspend crypto investment, do you really want to get out?

FTX’s thunderstorm is a turning point for Temasek’s tightening of encryption investment. Now Temasek has made it clear that it does not currently intend to invest in cryptocurrency companies amid uncertainty about the regulation of the cryptocurrency industry. **Since the FTX thunderstorm, Temasek has indeed not announced any encryption investment. **The last investment is the blockchain platform Partior announced in November 2022. As mentioned earlier, Partior is also formed by Temasek, JPMorgan Chase, Star It is a subsidiary enterprise jointly built by China Development Bank.

**Although the main body of Temasek has temporarily withdrawn from cryptocurrency investment, there is no further statement as to whether Superscrypt, an early Web3 venture capital fund under its independent operation, will also suspend encryption investment. **Since 2023, Superscrypt has invested 12 times. The most recent announcement of an investment was on June 30, and even 4 times were sold throughout June. Superscrypt has also been relatively low-key. Apart from the dynamics of investment projects on its official website and Twitter, there are few statements about encryption views.

In fact, Temasek has always been more cautious about crypto investment. In 2021, Robert Gutman, CEO of New York Digital Investment Group (NYDIG) and founder of Real Vision, revealed that Temasek has begun to buy Bitcoin, especially Bitcoin directly from the output of 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 the 2023 financial report was announced, Rohit Sipahimalani, chief investment officer of Temasek, once again emphasized that** we have never thought of investing in cryptocurrencies. **

In addition to repeatedly denying direct investment in cryptocurrencies, Temasek has also repeatedly denied investment in some encryption companies. For example, in 2018, Temasek denied participating in the pre-IPO financing of Bitmain. In May of this year, Temasek also issued a statement regarding “Array, a developer of an algorithmic currency system based on smart contracts and AI, received a $10 million investment from Temasek at a valuation of over $100 million.” Statement denied.

In addition, in the past two years, the news of Temasek’s participation in investing in encryption investment funds has not been confirmed. The $500 million encryption venture fund of the investment agency Hack VC has nothing to say in the end.

Today, when Temasek announced its 2023 fiscal year annual report, it announced its temporary retirement from crypto investment, which may warn us. The present, limited and imperfectly regulated, is likely to be an illusion. **