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MAS issues warning over unauthorised digital token exchanges and ICO

MAS issues warning over unauthorised digital token exchanges and ICO

A digital token is a cryptographically-secured
representation of a token-holder's rights to receive a benefit or to perform specified
functions.

On 24 May,
the Monetary Authority of Singapore
(MAS) has issued
warning
to eight digital token exchanges in Singapore and an Initial Coin
Offering (ICO) issuer.

“The number of digital token exchanges and digital token
offerings in Singapore has been increasing. 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.
The public should be aware that there is no regulatory safeguard if they choose
to trade on unregulated digital token exchanges or invest in digital tokens
that fall outside the remit of MAS’ rules,” said Mr Lee Boon Ngiap, Assistant
Managing Director (Capital Markets), MAS.

The warning to the eight digital token exchanges in
Singapore were requested not to facilitate trading in digital tokens without
MAS’ authorisation. MAS has reminded the eight digital token exchanges to seek
MAS’ authorisation if the digital tokens traded on their platforms constitute
securities or futures contracts under the Securities and Futures Act (SFA).

As reported
last year
, MAS has clarified
that the offer or issue of digital tokens in Singapore is be regulated by MAS
if the digital tokens constitute products regulated under the SFA Cap. 289.

Digital token exchanges commonly allow the buying and
selling of digital tokens using fiat currency, and also facilitate the exchange
of digital tokens between their clients. If the digital tokens constitute
securities or futures contracts, the exchanges must immediately cease the
trading of such digital tokens until they have been authorised as an approved
exchange or recognised market operator by MAS.

At the same time, MAS also warned an Initial Coin Offering
(ICO) issuer to stop the offering of its digital tokens in Singapore.

MAS has assessed that the issuer had contravened the SFA as
its tokens represented equity ownership in a company and therefore would be
considered as securities under the SFA. The offer was made without a
MAS-registered prospectus, which is a SFA requirement. The issuer has ceased
the offer and has taken remedial actions to comply with MAS’ regulations. It
has also returned all funds received from Singapore-based investors.

MAS has reiterated that digital token issuers,
intermediaries and platforms that offer, facilitate or trade digital tokens are
responsible for ensuring that they comply with all relevant laws.

To educate the public on digital tokens and the
risks involved, Singapore’s national financial education programme MoneySENSE has issued consumer
alerts
on ICO, digital tokens, and virtual currencies. MoneySENSE is
spearheaded by the Financial Education Steering Committee (FESC), which is
chaired by the MAS.

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