An overview of how ICOs are regulated in Singapore and other markets

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This article is part of Tech in Asia’s partnership with Asia Law Network where we publish articles written by lawyers on their advice for startup founders. For more articles in this series, go here.

In the first part of this series, I touched on the characteristics, types, risks, benefits, and examples of ICOs. In this second part, we will look at the current regulations for ICOs in various jurisdictions.

ICOs in Singapore

In November 2017, the Monetary Authority of Singapore (MAS) provided more details on the types of tokens that would fall within the ambit of the Securities and Futures Act (SFA). MAS will examine the structure, characteristics, and rights attached to a token to determine whether it can be considered a type of capital market product (e.g. securities, futures contracts, and contracts or arrangements for leveraged foreign exchange trading).

MAS also affirmed that offers of digital tokens that constitute a security or a unit in a collective investment scheme (CIS) will be subject to disclosure obligations under the SFA. The requirement of the offering shall be accompanied by a prospectus registered with MAS. Such an offer may be exempted from the prospectus requirement if:

• It does not exceed S$5 million (or around US$3.7 million).
• It is a private placement made to no more than 50 persons in 12 months.
• It is made to accredited or institutional investors under certain conditions.

When could an ICO be an offer of securities?

Under the SFA, the definition of securities includes shares, units of shares, debentures, units of debentures, contract for differences, and other such products.

Offer of shares

A share refers to a portion in the share capital of a corporation and generally includes stock.

Shares in a company entitle its holders to a set of rights, ranging from ownership in the company, voting rights, entitlement to future profits through dividends, and a claim on the residual assets of the company in the event the company is wound up.

If a token issued in an ICO has rights similar to these, then it is very likely that the token would be considered a share. Accordingly, the issuer of the token should make an offer of shares and be subject to the prospectus requirement.

Offer of debentures

Under section 239 of the SFA, “debentures” include debenture stock, bonds, notes, and any other debt securities issued by a corporation or entity, whether or not constituting a charge on the assets of the issuer.

Comparing ICO regulations globally