The Monetary Authority of Singapore has released a guide for businesses that want to make money via an initial coin offering in the city-state.
Securities, exemptions, licences
The authority back in August 2017 that some tokens count as securities and should follow the same laws as shares, debentures, business trust units, and securities-based derivative contracts.
According to the guide, tokens can be exempt from some of these rules if they fulfil certain criteria, for example, if they are worth under 5 million Singapore dollars (3.6 million USD), if they are to be distributed to fewer than 50 investors, and if they are distributed amongst institutional/accredited investors.
The report says that there are three types of people that sell tokens: those that are producing the tokens, those that manage an exchange upon which the token is traded, and those that provide financial advice as regards these tokens. MAS declares that these three activities are subject to the law.
Project owners must avail themselves of a capital markets services licence, providers of financial advice must hold a financial advisory licence (from the FAA), and an owner of an exchange must have his business approved and recognised by MAS. This includes those providing financial advice to Singaporeans from abroad.
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The authority says that even if a token is not a security, it may still need a licence to prove its compliance with anti money-laundering and terrorism obligations. These include reporting all suspicious transactions to the police, and generally not doing business with people who have have been deemed terrorists by the authorities.
Eleven types of person
This leads to a number of possible variations of legal definitions. The document lists eleven different hypothetical circumstances, with eleven different legal outcomes.
For example, if a token is to be used to buy services on a blockchain and nothing else (not as a publicly available medium of exchange, no voting rights at the company, for example), it will not be considered a digital payment token.
If a token is used as a digital representation of a share, there is a long list of legal requirements which must be fulfilled in order to operate legally in Singapore. However, if that same company makes its token only available abroad, many of these laws will not apply. However, it may then be considered a “fund manager” and require a specific licence for that.
Singapore, which recently hosted a major international cryptocurrency conference, does not consider digital currency to be legal tender, but has accepted its inevitability. Both Line of Japan and Binance of Hong Kong have big cryptocurrency-based operations there; the latter has received funding from the Singaporean government.
In late November, the country saw its first Bitcoin-related trial; a British company and a Japanese company are battling over the legality of reversing transactions that don’t seem profitable.