Positive updates on Singapore crypto regulations for CND utility token
Cryptomarkets are becoming more developed and more professional with each passing day — especially with the continued arrival of big institutions and corporations. To protect market players, financial regulators and supporters of institutionalization are beginning to work actively to describe more specific regulations and requirements for digital economics.
Our company is taking great care to ensure that Cindicator remains in the field of legality and adheres to the legitimate requirements of regulators, as is necessary to protect the rights of our token holders. Therefore, we started work with competent legal partners during preparation of our Token Sale and development of our CND utility token’s economic construction; we now continue this work with partners in the US, Gibraltar and other jurisdictions.
In a recent announcement by Singapore’s chief financial regulator (MAS), detailed requirements for various token types were published. In our Token Economy, CND is a utility token that does not meet the required definition of security. Due to this, Cindicator’s CND token is not required to follow regulators’ rules for securities’ emission and circulation.
It is clear from the published announcement that CND fully satisfies Singapore’s regulatory requirements for utility tokens; we are not required to take the obligations necessary for other types of tokens.
We are pleased that the official MAS position supports the legal strategy of our company. We are expecting similar documents from major economic regulators (especially from the US and China) so that we can officially begin global work in an entirely legal and protected manner.
Here we show a detailed review of MAS’s rules and classifications with an analysis of CND’s Token Economy by our US-based legal partner, Zegelman & Co:
Further Guide to Digital Token Offerings Published by Singapore Regulators
By: Julian Zegelman, Managing Partner | Velton Zegelman PC
Monetary Authority of Singapore (“MAS”), the governmental agency in charge of regulating financial markets in Singapore, recently published a new guide to digital token offerings. This guide is accessible online at:
This guide from MAS was long anticipated, since Singapore is an important jurisdiction for token offerings. Many issuers of digital tokens and crypto investment funds are incorporated in Singapore. On August 1, 2017, MAS published an earlier statement, clarifying that if a digital token constitutes a product regulated under the securities laws administered by MAS, the offer or issue of such digital tokens must comply with the applicable securities laws. However, the August 1st statement did not provide any specific examples or cases illustrating when a digital token is or is not a security under Singapore laws.
The latest MAS guide published on November 14, 2017, provides specific examples applying Singapore securities laws to structuring digital token sales available to Singapore residents. Specifically, it differentiates between “security” tokens — which are subject to the securities laws administered by MAS — and “utility” tokens — which are not.
Security tokens are generally described as digital representations of shares, debentures, or units in a collective investment scheme. For example, a digital token is a share, where it represents ownership interest in a corporation, represents liability of the token holder to the corporation, gives token holder a right to receive dividends or other distributions, and represents voting rights in the corporation.
A digital token is a debenture, where it represents indebtedness of the token issuer to the token holder with respect to the purchase price of the tokens. Such token can give a token holder the right to receive back the purchase price with a certain premium at a future date, for example through a guaranteed token buy back mechanism.
A digital token is a unit in a collective investment scheme, where it represents a right or interest in a common enterprise operated by a management team for the profit of all token holders.
When security tokens are created, they can only be advertised, sold and traded in Singapore in strict compliance with the applicable MAS securities laws. The November 14, 2017, MAS guide provides several case studies illustrating various types of securities tokens subject to MAS oversight.
A utility token is a digital token that does not constitute a security under applicable Singaporean securities laws. It can be marketed, sold and traded in Singapore without the need to comply with MAS securities regulations. The latest MAS guide included a case study illustrating one possible structure of such utility tokens. This case study can be summarized as follows:
Company A plans to set up a platform to enable sharing and rental of computing power amongst the users of the platform. Company A intends to offer digital tokens (“Token A”) in Singapore to raise funds to develop the platform. Token A will give token holders access rights to use Company A’s platform. The token can be used to pay for renting computing power provided by other platform users. Token A will not have any other rights or functions attached to it. Company A intends to offer Token A to any person globally, including in Singapore.
Application of securities laws administered by MAS in respect of an offer of Token A
· A holder of Token A will only have rights to access and use Company A’s platform, and the right to use Token A to pay for rental of computing power provided by other users. Token A will not provide its holder any other rights or functions attached to it. Hence, Token A will not constitute securities under the SFA.
· Company A’s offer of Token A will not be subject to any requirement under the SFA or the FAA.
In fact, the above case study fits closely the legal structure of CND tokens previously created and distributed by Cindicator Ltd. Our law firm — Velton Zegelman PC (www.vzfirm.com) — acted as legal counsel to Cindicator in the white listed token generation event. In the course of designing and documenting Cindicator’s innovative token generation event, we ensured that the CND tokens fall under the definition of utility tokens in Singapore.
Specifically, CND tokens do not provide its holders with any shares in Cindicator Ltd or any other corporation operated by the Cindicator group of companies. CND tokens likewise do not constitute a debenture, because holders of CND tokens are not entitled to any repayment or automatic buybacks. Furthermore, CND tokens do not constitute units in a collective investment scheme, because their sole purpose is to enable CND token holders to receive certain predictive analytics services from Cindicator and other participants in the Cindicator platform. We are pleased that official MAS position supports the legal strategy devised by Velton Zegelman PC and implemented by Cindicator team.
