Temasek, a Singaporean state holding company owned by the Government of Singapore, has written off its entire investment in digital asset exchange FTX. The fund's overall exposure to the exchange is negligible compared to its wider portfolio holdings. Prior to its investment in 2021, Temasek said that it conducted eight months of due diligence on FTX before eventually purchasing a 1% stake in FTX International. 

On Wednesday, full-service digital currency prime broker Genesis Trading, announced to its clients that it would be temporarily halting withdrawals from its lending arm (i.e. Genesis Global Capital), citing “unprecedented market turmoil” as a result of the insolvency of FTX.

According to The Block, EU lawmakers have differing views on how upcoming crypto regulation would have influenced the collapse of FTX. Whilst some EU officials believe the Markets in Crypto Assets regulation — expected to be implemented by 2024 — would strongly protect EU citizens from events similar to FTX, others are less certain.

Top stories in the Crypto Roundup today:

• Temasek’s FTX Investment Is Now Worth Zero
• Genesis Suspending Client Withdrawals for Lending Arm 
• EU Crypto Regulation Would Have Limited Impact on FTX

Temasek’s FTX Investment Is Now Worth Zero

Temasek, a Singaporean state holding company owned by the Government of Singapore, has written off its entire investment in digital asset exchange FTX. The fund's overall exposure to the exchange is negligible compared to its wider portfolio holdings. Prior to its investment in 2021, Temasek said that it conducted eight months of due diligence on FTX before eventually purchasing a 1% stake in FTX International. 

In a statement released on Thursday, which is one of Singapore’s two sovereign wealth funds, stated that they invested “US$210 million for a minority stake of ~1% in FTX International, and invested US$65 million for a minority stake of ~1.5% in FTX US, across 2 funding rounds from October 2021 to January 2022.” The investment in FTX comprised 0.09% of Temasek's net portfolio valued at ~ S$403 billion as of 31 March 2022.

Despite the failure of its investment, Temasek has reiterated that this is not a failure of cryptocurrency or blockchain technology, but instead, a poor bet on Bankman-Fried. 

“It is apparent from this investment that perhaps our belief in the actions, judgment and leadership of Sam Bankman-Fried, formed from our interactions with him and views expressed in our discussions with others, would appear to have been misplaced,” Temasek said. "While this write down of our investment in FTX will not have significant impact on our overall performance, we treat any investment losses seriously, and there will be learnings for us from this."

Genesis Suspending Client Withdrawals for Lending Arm

On Wednesday, full-service digital currency prime broker Genesis Trading, announced to its clients that it would be temporarily halting withdrawals from its lending arm (i.e. Genesis Global Capital), citing “unprecedented market turmoil” as a result of the insolvency of FTX. 

"In consultation with our professional financial advisors and counsel, we have taken the difficult decision to temporarily suspend redemptions and new loan originations in the lending business," the firm wrote.

Genesis has reported that it has over $12.5bn worth of outstanding loans and that it processed over $130bn throughout 2021. The firm also revealed that it had $175m in exposure to FTX via its derivatives trading arm.

"Our operating capital and net positions in FTX are not material to our business. Circumstances surrounding FTX have not impeded the full functioning of our trading franchise," the firm tweeted on November 10.

Genesis Trading’s parent company, Digital Currency Group (DCG), has recently stepped in to provide it with $140m in equity. DCG also said that Genesis' "temporary action has no impact on the business operations of DCG and our other wholly owned subsidiaries."

EU Crypto Regulation Would Have Limited Impact on FTX

According to The Block, EU lawmakers have differing views on how upcoming crypto regulation would have influenced the collapse of FTX. Whilst some EU officials believe the Markets in Crypto Assets (MiCA) regulation — expected to be implemented by 2024 — would strongly protect EU citizens from events similar to FTX, others are less certain.

“I don't see exactly how MiCA would be able to fully stop or prevent this,” Ondrej Kovarik, center-right member of the European Parliament (MEP) who was a co-legislator on MiCA, told The Block in an interview. “I can imagine that some aspects of it would be mitigated or some or alleviated,” he said, but added: "It would be too simple to just say that only crypto asset regulation would solve this.”

The MiCA framework is a licesnsing process for EU based crypto service providers. It includes requirements on risk management,  segregation of client and firm funds, disclosure of conflict of interests, and more. The exact details still need to be fleshed out by Europe’s financial regulators. 

While MEP Stefan Berger, who was the Parliament’s main negotiator on the crypto laws, previously told The Block that “MiCA is the bulwark against Lehman Brothers moments such as the FTX case," Kovarik is more reserved. The issue is broader than just crypto, according to Kovarik. “The real causes of the crash lie also somewhere else than what a crypto asset regulation can actually cover.”

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