The Monetary Authority of Singapore (MAS) has published updated guidance for entities that seek to conduct initial coin offerings (ICOs) in the Lion City.
The updated document, published on 14 November 2018 entitled "A guide to digital token offerings", provides general guidance on the application of securities laws administered by MAS in respect of offers or issues of digital tokens in Singapore.
The guide is not intended to be exhaustive, has "no legal effect" and does not modify or supersede existing laws; it does, however, provide clarity on the MAS position on a major market.
In August 2017, MAS clarified that digital tokens considered as securities should follow the same laws as shares, debentures, business trust units and securities-based derivative contracts.
As flagged in its earlier guidance, in November 2018, MAS introduced the new Payment Services Bill (PSB) in Parliament – the PSB will see dealings in digital currency further brought within the scope of MAS's regulatory purview, as well as anti-money laundering and counter terrorism financing (AML/CFT) regulation, imposing obligations on those dealing in digital currency in this regard.
Anti-money laundering and counter-terrorism financing
MAS has made its position clear in its guidance: dealings in digital tokens are not immune from AML/CFT requirements.
Dealings related to digital tokens will be regulated under the PSB and appropriate AML/CFT policies, procedures and controls need to be put into place and implemented.
Intermediaries are subject to these obligations too, the guidance confirms.
An "intermediary" can include almost anyone engaged in activities related to ICOs – including token issuers, exchange platforms and financial advisers.
ICO issuers must obtain a capital markets services license, financial advisers must get a financial advisory license and digital asset exchanges must be approved or recognised by MAS.
Intermediaries that operate overseas still need to take heed of this guidance; the same rules will apply even where intermediaries are not based, or only partly based, in Singapore.
MAS recommend that intermediaries should:
- examine and assess their own money laundering and terrorism financing risks;
- introduce and implement appropriate policies, procedures and controls – noting the importance of "customer due diligence and transaction monitoring, reporting suspicious transactions and record keeping"; and
- where higher risks of money laundering and terrorism-financing risks are identified, adopt "enhanced measures" so as to address this.
The guidance notes that even where dealings in digital tokens remain outside of the scope of MAS review, other statutory obligations will likely still apply – including obligations to report to the police suspicious transactions as well as refraining from engaging in business with entities that have been designated as having links to terrorism under the relevant legislation, including the Terrorism (Suppression of Financing) Act (Cap 325).
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