The Monetary Authority of Singapore (MAS) is out with a statement today regarding the burgeoning Initial Coin Offering or ICO market.
The cryptocurrency driven funding sector has been red hot in recent months with some issuers raising tens of millions of dollars in a totally unregulated marketplace. That was until last week when the US Securities and Exchange Commission (SEC) came out with a statement indicating its intent on pursuing ICOs that are determined to be securities. Effectively a legal shot across the bow by the Feds.
Today, MAS is taking a similar posture stating the offer or issue of digital tokens in Singapore will be regulated by MAS if the digital tokens constitute products regulated under the Securities and Futures Act (SFA). MAS had published a statement in 2014 saying that while digital currencies were not regulated, intermediaries or exchanges would be regulated for money laundering and possible terrorist financing.
Additionally, MAS said that ICOs are vulnerable to money laundering and terrorist financing due to the anonymous nature of these transactions. MAS had published a statement in 2014 saying that while digital currencies were not regulated, intermediaries or exchanges would be regulated for money laundering and possible terrorist financing. MAS is currently assessing how to regulate ML/TF risks associated with activities involving digital tokens that do not function solely as virtual currencies.
MAS said that digital tokens have evolved beyond being a virtual currency. Some digital tokens may represent ownership or a security interest over an issuer’s assets or property. Such tokens may therefore be considered an offer of shares or units in a collective investment scheme under the SFA. Digital tokens may also represent a debt owed by an issuer and be considered a debenture under the SFA.
Issuers of tokens may be required to lodge and register a prospectus with MAS prior to the offer of such tokens, unless exempted for some reason. Correspondingly, issuers or intermediaries of digital tokens would also be subject to licensing requirements under the SFA and Financial Advisers Act, unless exempted, along with the applicable requirements on AML etc..
Platforms facilitating secondary trading of such tokens would also have to be approved or recognized by MAS as an approved exchange or recognized market operator respectively under the SFA.
Some digital tokens may not be subject to these rules but issuers probably should not risk an enforcement action. Talk to your attorney. Reach out to MAS. And then decide.