Singapore to regulate ICOs that resemble equity and debt offerings

Boat Quay, Singapore. Photo credit: doe5999 / 123RF.

The Monetary Authority of Singapore (MAS) has published a paper offering “general guidance” on the regulation of digital token sales – otherwise known as initial coin offerings (ICOs).

Digital tokens that MAS determines to have characteristics of capital market products will fall under the purview of Singapore’s Securities and Futures Act (SFA). These products include securities such as equity shares, debt instruments, and units in a collective investment scheme (CIS) where different investors pool their money into a portfolio.

Published yesterday, the paper follows the central bank’s August statement clarifying its regulatory stance on ICOs.

The paper reiterates what MAS indicated in that earlier policy note, where it said that some digital tokens issued in ICOs possess the characteristics of security holdings in the businesses making the offering.

As such, organizations issuing tokens that MAS considers to be akin to capital markets products must publish a regulation-compliant investment prospectus and register it with the central bank.

However, in its paper MAS also says that some smaller ICOs may be exempt from these prospectus requirements if:

• The total value of the offering does not exceed S$5 million or the equivalent in foreign currency within any 12-month period
• It’s a private placement offer made to no more than 50 people within any 12-month period
• The offer is made to institutional investors only
• The offer is made to accredited investors

MAS stresses that all of the above cases are subject to certain conditions, including advertising restrictions.

Required licenses

In terms of digital token issuers and intermediaries, MAS has also updated its advice. The paper says that any organization offering tokens that constitute a capital markets product must hold a capital markets services license, unless they are otherwise exempted.

Platforms that facilitate the trading of digital tokens — such as cryptocurrency exchanges – must also be approved by MAS as a recognized market operator under the SFA. Likewise, firms offering financial advice on digital tokens require a financial adviser’s license.

All in all, the MAS paper does not radically change the lay of the land when it comes to ICOs in Singapore. Rather, it follows the path MAS appears to have taken so far, of gradually updating its guidance as trends and developments in the digital token space become clearer over time.

MAS said that the contents of its paper are “not exhaustive, have no legal effect, and do not modify or supersede any applicable laws, regulations or requirements.”