The Monetary Authority of Singapore (MAS) clarified that digital tokens will be regulated by MAS if they constitute products regulated under the Securities and Futures Act (SFA).
MAS’ clarification comes in the wake of a recent increase in the number of initial coin (or token) offerings (ICOs) in Singapore as a means of raising funds, according to a press statement on August 1, 2017.
A virtual currency is one particular type of digital token, which typically functions as a medium of exchange, a unit of account or a store of value. ICOs are vulnerable to money laundering and terrorist financing (ML/TF) risks due to the anonymous nature of the transactions. Large sums of monies could also be raised in a short period of time.
The financial regulator has observed that the function of digital tokens has evolved beyond just being a virtual currency.
For example, 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 that fall within the definition of securities in SFA would be required to lodge and register a prospectus with MAS prior to the offer of such tokens, unless exempted.
Issuers or intermediaries of such tokens would also be subject to licensing requirements under the SFA and Financial Advisers Act – unless exempted – and the applicable requirements on anti-money laundering and countering the financing of terrorism.
In addition, platforms facilitating secondary trading of such tokens would also have to be approved or recognised by MAS.