MAS Issues Guidelines on ICO Securities Law

MAS Issues Guidelines on ICO Securities Law

Singapore`s central bank has issued new guidelines on initial coin offerings (ICOs), stating how tokens should be applied under its securities law.

Chinese Blockchain Association Will Regulate ICOs
France To Regulate Crypto With Working Group
Japan’s Bitcoin Exchanges Market Under Regulatory Supervision

Singapore`s central bank has issued new guidelines on initial coin offerings (ICOs), stating how tokens should be applied under its securities law.

In its newly published report, MAS writes that offers or issues of digital tokens may be regulated by them if the digital tokens are capital markets products under the SFA. The regulator elaborates on that statement by claiming that capital markets products could possibly include any securities, futures contracts and contracts or arrangements for purposes of leveraged foreign exchange trading.

Also, MAS states that they will “examine the structure and characteristics of, including the rights attached to, a digital token in determining if the digital token is a type of capital markets products under the SFA. As the report specifies, digital tokens may be:

  • a share, where it confers or represents ownership interest in a corporation, represents liability of the token holder in the corporation, and represents mutual covenants with other token holders in the corporation inter se;
  • 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
  • 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.

Besides, the report offers a selection of case studies, explaining how the securities laws crafted by MAS can apply in different case. For example, Case study 2 from the official paper reads as it follows:

Company B is in the business of developing properties and operating commercial buildings. It plans to raise funds to develop a shopping mall by offering digital tokens (“Token B”) to any person globally, including in Singapore. Token B will be structured to represent a share in Company B, and will be a digital representation of a token holder’s ownership in Company B. Company B also intends to provide financial advice in relation to its offer of Token B.

Application of securities laws administered by MAS in respect of an offer of Token B

  • Token B will be a share and constitute securities under the SFA.
  • The offer of Token B will need to comply with Prospectus Requirements, unless the offer is otherwise exempted under the SFA.
  • Company B will likely require a capital markets services license for carrying on business in the regulated activity of dealing in securities under the SFA, unless otherwise exempted.
  • To provide financial advice in relation to its offer of Token B, Company B will need to be a licensed financial adviser, unless otherwise exempted.“

This and other case studies are being listed by MAS with illustrative purposes. While not exhaustive, they offer some concrete examples to be considered by the ones interested in the subject.

Finally, MAS states that any firm that is considering applying the technology and that is likely to be regulated by MAS can apply for the regulatory sandbox. However, the regulator expects that interested firms would have tested the proposed financial service beforehand.

COMMENTS