Singapore's Central Bank issued the new guidelines on Initial Coin Offerings, also known as ICOs, on how tokens will be applied under the securities laws.
Singapore’s Central Bank recently issued the new guidelines on Initial Coin Offerings, also known as ICOs, on how tokens will be applied under the securities laws.
The 13-page document provides details of how offers or digital tokens will be regulated by MAS (Monetary Authority of Singapore) in case the digital tokens are used as capital market products under SFA (Securities and Future Act). Capital market products normally include securities, future contracts as well as contracts or arrangements related to leveraged foreign exchange activities.
The report also indicates that the central bank will also examine both the structure and characteristics of cryptocurrency to determine whether it is a type of market products covered under SFA.
The guideline further highlights that a digital token shall constitute the following:
1. A share – where it either confers or represents the ownership interest in a company, represents liability of cryptocurrency holder in the corporation and finally represents mutual covenants when it comes to other digital token holders in the corporation.
2. A debenture – where it constitutes/evidences the indebtedness of token issuer in respect to any funds that are lent to issuer by digital token holder.
3. A unit – where its used in a CIS (collective investment scheme) and represents the rights or interest in CIS, or used as an option to acquire interest or rights in CIS.
The document also provides a number of case studies, that illustrates on different ways that securities laws outlined by MAS will apply.
However, it goes further to indicate that these are not conclusive ways of how these securities laws will be applied to a specific case affecting an offer or issue of tokens. For instance, in the case study one, the report focuses on a token that is tied to rental and sharing of the computing power among the users, where the MAS says that this will not constitute to securities covered by SFA.
And in the second case study, the report is clear when it comes to operating commercial buildings or development of properties and digital tokens are used to represent a share in the organization and the regulator indicates that this will constitute to securities.These latest guidelines by MAS tend to support the previous comments issued by central bank in regards to ICOs, that they should be regulated.
In August, the announcement was made by the financial regulator that it will regulate the issuance of ICOs or digital tokens. Sometimes back, Singapore was experiencing an increased number of digital token sales used as a way of raising funds and that made the digital tokens to be more than just a virtual currency.