On 14 November 2017, the Monetary Authority of Singapore (MAS) released a guide to digital token offerings. The guide provides a guidance on the application of the securities laws in Singapore in relation to offers of digital tokens.
According to the guide, digital tokens constitute capital market products, if they represent equity in a corporation, a debenture of the issuer or a unit in a collective investment scheme (CIS). The offering of such tokens has to comply with the Securities and Futures Act (SFA). The requirements of the SFA for such offerings include that they must be made in or accompanied by a prospectus that is registered with the MAS.
Exempt from the prospectus requirement are the following offers:
- Small offers that do not exceed S$ 5 million in a 12-month period;
- private placement offers made to no more than 50 persons in a 12-month period;
- offers to institutional investors only;
- offers to accredited investors.
Except for offers to institutional investors, the SFA provides requirements for these offers, too – e.g. advertising restrictions. In addition, where an offer is made in relation to units in a CIS, the CIS is subject to authorisation or recognition requirements. Further, intermediaries facilitating the offering or issuance of digital tokens may be required to obtain a licence or approval from the MAS depending on their business activity.
The guide emphasizes that relevant MAS notices regarding anti-money laundering and countering the financing of terrorism may apply to digital token offerings. For instance, there are obligations to report suspicious transactions and prohibitions from dealing with or providing financial services to designated individuals and entities pursuant to the Terrorism Act. MAS further 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.
Finally, MAS notes that firms looking to apply technology in an innovative way to provide new financial services that are regulated by the MAS can apply for the regulatory sandbox. The MAS will then provide appropriate regulatory support to successful applicants by relaxing specific legal and regulatory requirements, which the applicant would otherwise be subject to, for the duration of the sandbox.