Singapore: MAS issues warnings on digital token exchanges and ICOs

​The Monetary Authority of Singapore has issued warnings to eight digital token exchanges in Singapore and halted an initial coin offering for breaching securities regulations.

The offer or issue of digital tokens, or initial coin offerings (ICOs), has been gaining greater popularity globally, including in Singapore. The Monetary Authority of Singapore (MAS) had clarified that such issuance of digital tokens in Singapore will be regulated by the MAS if the digital tokens constitute products regulated under the Securities and Futures Act (Cap. 289) of Singapore (SFA).

Read our article on the offer of digital tokens in Singapore

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The MAS has on 24 May 2018 stopped an unidentified issuer of an ICO from offering its digital tokens in Singapore. The issuer had been deemed to have breached the SFA as the digital tokens represented equity ownership in a company and would therefore be considered “securities” under the SFA. Under the SFA, unless otherwise exempted, an offer of securities must be accompanied by a SFA-compliant prospectus, which has to be registered with the MAS.

While it is unclear how much was raised from investors in Singapore, the ICO issuer has since ceased the offer and is taking remedial actions to comply with the local laws and regulations, including returning all funds received from Singapore-based investors.

On 14 November 2017, the MAS issued “A Guide to Digital Token Offerings”, which provides general guidance on the application of the securities laws administered by the MAS in relation to offers or issues of digital tokens in Singapore. Briefly, offers or issues of digital tokens may be regulated by the MAS if the digital tokens are “capital markets products” under the SFA, and these generally include securities, futures contracts and contracts or arrangements for purposes of leveraged foreign exchange trading.

The MAS has indicated that they will examine the structure and characteristics of, including the rights attached to, a digital token in determining if the digital token is a type of capital markets products under the SFA.

Additionally, the MAS has reminded eight digital token exchanges to seek MAS’ authorisation if the digital tokens traded on their platforms constitute securities or futures contracts under the SFA. If the digital tokens constitute securities or futures contracts, such exchanges must immediately cease the trading of such digital tokens until they have been authorised as an approved exchange or recognised market operator by the MAS.

To reiterate the MAS’ position in respect of digital token exchanges and ICOs, Mr Lee Boon Ngiap, Assistant Managing Director (Capital Markets), MAS, indicated that “We do not see a need to restrict them if they are bona fide businesses. But if any digital token exchange, issuer or intermediary breaches our securities laws, MAS will take firm action.”

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