Singapore Clarifies Regulatory Position on Digital Token Offerings

US regulations have no bearing on Singapore’s stance on digital tokens

Photo by Chen Hu on Unsplash

In August 2017 the Monetary Authority of Singapore (“MAS”) announced that it would regulate the exchange of virtual currencies and the offer or issue of digital tokens. This announcement came in the wake of an increase in the number of initial coin offerings (ICOs) as a means of raising funds. The new rules were part of a broader set of new regulations on payment services designed to control money laundering and terrorism financing risks. The MAS noted that a number of digital tokens had functions beyond just virtual currency, and may represent products regulated under Singapore’s Securities and Futures Act (SFA).

On November 30, 2018 the MAS published new guidelines on clarifying its position on digital token offerings, which may be regulated by MAS if they are considered “capital markets products” under the SFA. Capital markets products includes any securities (shares, debentures, and units in a business trust), units in a collective investment scheme, derivatives contracts, and spot foreign exchange contracts for the purposes of leveraged foreign exchange trading. Details include:

• Exemptions from Prospectus Requirements. A collective investment scheme (“CIS”) Offer may be exempt from submitting prospectus to MAS if it is a small (personal) offer that does not exceed $5 million SGD within any 12-month period; if it is a private placement offer made to no more than 50 persons within any 12-month period; or if it is made to institutional investors and/or accredited investors only. Any exemptions are subject to advertising restrictions.
• Intermediaries who “facilitate offers or issues of digital tokens,” including platforms that issue and individuals who operate trading platforms, must hold a MAS-issued capital markets service license for regulated activity under the SFA if the relevant digital tokens constitute any type of capital markets products. The SFA applies extra-territorially to such intermediaries.
• Financial advice providers, defined as “a person who provides any financial advice in Singapore in respect of any digital token that is an investment product,” must be authorized by a financial adviser’s license or be an exempt financial adviser under the Financial Advisers Act (“FAA”). The FAA applies extra-territorially to financial advisers.

According to Bernice Tian of Pinsent Masons MPillay, US regulation has no bearing on Singapore’s regulation of digital tokens: “the treatment of a token under US laws is also not a consideration for deciding whether the token constitutes a security under Singapore laws. Token issuers should consider whether the features of their token are such that the token is a type of capital market product that falls within the ambit of the SFA.”

The MAS update has further clarified its regulatory position with a number of new case studies, and includes Critical Questions and a Checklist to help determine whether it is necessary to contact MAS to review legal opinions regarding compliance with securities laws. We recommend reading the MAS guidelines carefully and seeking qualified legal advice regarding your digital token project.