The Monetary Authority of Singapore (MAS) has published a “guide to digital token offerings”, which seeks to elaborate upon how initial coin offerings (ICOs) will be subject to Singapore’s securities laws. The document comprises a followup to the MAS’ August 1st statement that first clarified that ICOs deemed to be issuing securities in Singapore will fall under the regulatory jurisdiction of the securities laws administered by the MAS.
The Paper Discusses the Regulatory Implications of the Securities and Futures Act (SFA) and the Financial Advisers Act (FAA) for ICOs
The guidelines state that “issues of digital tokens may be regulated by MAS if the digital tokens are capital markets products under the SFA. Capital markets products include any securities, futures contracts and contracts or arrangements for purposes of leveraged foreign exchange trading.” The MAS defines securities as comprising a share, a debenture, or a unit in a collective investment scheme.
The MAS states that “a person may only make an offer of digital tokens which constitute securities or units in a CIS (‘Offer’), if the Offer complies with the requirements under Part XIII of the SFA. This includes the requirements that the Offer must be made in or accompanied by a prospectus that is prepared in accordance with the SFA and is registered with MAS.” The document, however, adds that “an Offer may nevertheless be exempt from the Prospectus Requirements where… the Offer is a small of securities of an entity, or units in a CIS, that does not exceed S5$ million…; the Offer is a private placement off made to no more than 50 persons…; the Offer is made to institutional investors only; or the offer is made to accredited investors.”
The document addresses the regulatory implications for “intermediaries [that] typically facilitate offers or issues of digital tokens.” The MAS defines said intermediaries as “a person who operates a platform on which one or more offerors of digital tokens may make primary offers or issues of digital tokens (‘primary platform’); a person who provides financial advice in respect of any digital tokens; [or] a person who operates a platform at which digital tokens are traded (‘trading platform’)”.
Digital Tokens That Are Not Within the MAS’ Regulatory Jurisdiction May Be to Subject to Anti-Money Laundering and Anti-Terrorism Financing Laws
The document states that “a person who operates a primary platform in Singapore in relation to digital tokens which constitute any type of capital markets products, may be carrying on business in one or more regulated under the SFA,” adding that said “person… must hold a capital markets services license for that regulated activity under the SFA.” Similarly, “a person who establishes or operates a trading platform in Singapore in relation to digital tokens which constitute securities or futures contracts, … must be approved by MAS as an approved exchange, or recognized by MAS as a recognized market operator under the SFA.” Persons providing financial advice regarding digital tokens “must be authorized to do so… by a financial adviser’s license, or be an exempt financial adviser, under the FAA.”
The MAS states that “digital tokens that perform functions which may not be within MAS’ regulatory purview may nonetheless be subject to other legislation for combating money laundering and terrorism financing.” The regulator also states its intent to “establish a new payments services framework… that will include rules to address money laundering and terrorism financing risks relating to the dealing or exchange of virtual currencies.”
The guidelines were published on the same day that Mr. Ravi Menon, the managing director of the MAS, spoke at the second Singapore Fintech Festival. During Mr. Menon’s speech, the managing director addressed Singapore’s regulatory position with regard to cryptocurrencies. Mr. Menon stated “MAS does not regulate virtual currencies; in fact, we welcome them as an innovation that can potentially reduce the cost of financial transactions. But we regulate the activities that surround virtual currencies if these activities pose specific risks.”
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