FTX Collapse Spells Out More Pain For Asian Retailers

Key Insights

• The effect of the FTX collapse cuts across every player in the industry 
• Singapore-owned Temasek has written off its entire $275 million investment in FTX. 
• While Asian retailers are counting their losses, some exchanges have suspended the withdrawal features.

The FTX debacle started when some customers could not withdraw their funds from the exchange. Shortly after, it filed for bankruptcy. 

In the bankruptcy filing, the crypto exchange cited some creditors, including hedge funds, institutional investors, and crypto entities. Additionally, the collapse will largely affect retail investors. 

The report shows that Singapore and Hong Kong are the two Asian countries that would be (mostly) affected by the collapse. 

In the next chapter, we shall identify the impact of the collapse on the crypto market and how it affects Asian retailers. 

FTX Collapse Hits Asian Retailers

The crypto market has been in a crypto winter for a long while. Industry players have been battling a prolonged slump in the crypto market. Alas, the crash of the once-mighty crypto exchange, FTX, compounds the woe of the market. 

The problem started when the exchange could not meet a torrent of withdrawals from customers (last week). After that, Sam Bankman-Fried, the founder of FTX, filed for bankruptcy protection. Earlier,  Three Arrows Capital, Celsius Network, and Babel Finance filed for bankruptcy. 

Furthermore, an investigation showed that FTX had the backing of prominent investors from Asia. These investors include Japan's SoftBank and Singapore's Temasek. Similarly, the collapse has affected these Asian giants. 

Several investors and retailers are currently calculating their losses and other impacts of the collapse.

For instance, Singapore-based Temasek participated in two funding rounds between October 2021 to January 2022. The state-owned investment company invested $210 million and $65 million in FTX International and FTX US, respectively. Shortly after the collapse, Temasek announced that it would write down its entire $275 million investment in the exchange. 

What Is The Way Forward?

The impact of the collapse goes beyond Asian retailers; it cuts across every player in the industry. 

For instance, the lending arm of crypto brokerage Genesis had to suspend redemptions and new loan origination. This is because the withdrawal request had exceeded its current liquidity. 

Similarly, BlockFi, a crypto lending platform, suspends customer withdrawals. 

FTX was founded in Hong Kong and later moved its headquarters to the Bahamas. Fortunately, Hong Kong's strict crypto market regulation has helped shield fund managers and retail investors from the collapse. 

However, investors and retailers spread across other Asian countries were badly affected. Experts say these retailers, alongside venture capitalists and digital asset managers, are lamenting. 

Similarly, most have written off their investments and promised never to venture into cryptocurrency.