The Monetary Authority of Singapore (MAS) has issued a paper
providing general guidance on the application of the securities laws
administered by MAS in relation to offers or issues of digital tokens in
A digital token is a cryptographically-secured representation
of a token-holder's rights to receive a benefit or to perform specified
functions. 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, such as Bitcoin.
In August 2017, MAS clarified
that if a digital token constitutes a product regulated under the securities
laws administered by MAS, the offer or issue of digital tokens must comply with
the applicable securities laws.
For purposes of this guide, the securities laws refer to the
Securities and Futures Act (Cap. 289) (“SFA”) and the Financial Advisers Act
(Cap. 110) (“FAA”).
Offers or issues of digital tokens may be regulated by MAS
if the digital tokens are capital markets products under the Securities and
Futures Act (Cap. 289) (SFA). Capital markets products include any securities,
futures contracts and contracts or arrangements for purposes of leveraged
foreign exchange trading.
For instance, a digital token may constitute: 1) a share,
where it confers or represents ownership interest in a corporation , represents
liability of the token holder in the corporation4, and represents mutual
covenants with other token holders in the corporation; 2) a debenture, where it
constitutes or evidences the indebtedness of the issuer of the digital token in
respect of any money that is or may be lent to the issuer by a token holder; or
3) a unit in a collective investment scheme (CIS), where it represents a right
or interest in a CIS, or an option to acquire a right or interest in a CIS.
An Offer may still be exempt from the Requirements where,
amongst others: 1) the Offer is a small offer of securities of an entity, or
units in a CIS, that does not exceed S$5 million (or its equivalent in a
foreign currency) within any 12-month period, subject to certain conditions; 2)
the Offer is a private placement offer made to no more than 50 persons within
any 12-month period, subject to certain conditions; 3) the Offer is made to
institutional investors only; or 5) the Offer is made to accredited investors15
, subject to certain conditions.
The paper also covers intermediaries who facilitate offers
or issues of digital tokens. A person who operates a platform on which one or
more offerors of digital tokens may make primary offers or issues of digital
tokens (primary platform); a person who provides financial advice in respect of
any digital tokens; and people operating platforms at which digital tokens are
traded (trading platform) are subject to relevant licensing or approval
requirements from MAS, if the digital tokens involved constitute regulated
products. Even if the intermediaries are operating partly outside of
Singapore, or outside of Singapore, the requirements of the SFA may still
Digital tokens that perform functions which may not be
within MAS’ regulatory purview may nonetheless be subject to other legislation
for combating money laundering and terrorism financing.
Obligations are applicable to report suspicious transactions
with the Suspicious Transaction Reporting Office, Commercial Affairs Department
of the Singapore Police Force pursuant to section 39 of the Corruption, Drug
Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Cap. 65A)
and Prohibitions from dealing with or
providing financial services to designated individuals and entities pursuant to
the Terrorism (Suppression of Financing) Act (Cap. 325) and various regulations
giving effect to United Nations Security Council Resolutions.
MAS also intends to establish a new payments services
framework that will include rules to address money laundering and terrorism
financing risks relating to the dealing or exchange of virtual currencies for
fiat or other virtual currencies.
Such intermediaries will be required to put in place
policies, procedures and controls to address such risks. These will include
requirements to conduct customer due diligence, monitor transactions, perform
screening, report suspicious transactions and keep adequate records.
Access the paper here.