ICOs (Initial Coin Offering) in Singapore

4 minute read

Considered “the most technology-ready nation” by the World Economic Forum and dubbed as “the city with the best investment potential” and “the world’s smartest city,” Singapore has definitely earned a lot of accolades in the fintech arena during the recent years and is surely making waves in the cryptocurrency world.

This article is best paired with our other ICO guide, What is an ICO and is it right for my startup?


The Singapore-ICO love affair

Officially recognized as the third-largest financial centre in the world, it’s no surprise that Singapore ranks third in the roster of the biggest markets for ICO issuance worldwide, only a couple points behind Switzerland and the United States.

With the prohibition on ICOs in China in September of 2017, Singapore grew to become one of the ICO-friendly locations for business personalities and

entrepreneurs zeroing in on conducting token launches. Numbers don’t lie: the country’s Q1 2018 ICO funding outperformed the total ICO funding of 2017.

There have already been several notable rockstars. Bluzelle raised almost $20 million with its 24-hour campaign in February of 2018, while TenX famously raised US$43 million in seven minutes.

Not only do both Singapore-based ICOs illustrate the country’s promising outlook for other startups and investors, they clearly suggest how large and old businesses alike are looking into the digital currency arena, recognizing the dominating influence of the blockchain and all the advantages that comes with it.

Why Singapore for ICOs?

Jurisdiction of choice for clear-cut regulatory policies

With its supportive regulatory treatment towards the crypto craze, Singapore has earned the title “jurisdiction of choice” for ICOs, which has helped promote a cryptocurrency and blockchain system in the country.

In essence, the ICOs are largely unregulated if the tokens offered do not qualify as securities under Singapore laws (we’ll get to what that means in a minute). Singapore’s central financial regulatory authority, the Monetary Authority of Singapore (MAS) simply holds ICO participants to be accountable in conducting independent legal due diligence on their own and address any risks associated with money laundering and financing terrorism during the issuance of tokens.

MAS and Singapore ICO Regulations

The main regulator in the ICO space is the Monetary Authority of Singapore (MAS), who governs and oversees the country’s regulations involving money, insurance, banking, securities, and currency issuance.

In November, MAS published “A Guide to Digital Token Offerings”, which outlined in detail how Singapore securities laws applied to issues or offers of digital tokens. The guide stipulated that issues or offers of digital tokens may be regulated if the digital token is a categorized as a capital markets product as determined by the Securities and Futures Act.

Under the SFA, “capital markets products” include all types of securities, future contracts, and arrangements and contracts for such purposes as leveraged foreign exchange trading or foreign exchange trading.

OK… but what does this mean?

The MAS had earlier declared that while it does not regulate regulate virtual currencies per se since they are not recognised as securities or legal tender, it regulates virtual currency intermediaries because of their association to various terrorist financing and money laundering risks.

It’s also fair to say that given the fact that the MAS has witnessed how the function of some of these digital tokens have developed beyond being solely a virtual currency over the years.

To illustrate, digital tokens may represent a security interest over or ownership of an issuer’s property or asset. These tokens may therefore be recognized as an offer of units or shares in a collective investment scheme. Further, under the SAF, digital tokens may represent a debt owed by an issuer and essentially considered a debenture.

The new rules

Now, MAS maintains that where digital tokens constitute securities or units in a collective investment scheme, you need a prospectus, and may be subject to recognition and authorisation requirements. You can be exempted from the prospectus requirement if the ICO:

  • Does not exceed S$5 million (or around US$3.7 million)
  • Is a private placement made to no more than 50 persons in 12 months
  • Is made to accredited or institutional investors under certain conditions

They’ve also introduced additional licenses:

  1. Anyone operating a cryptocurrency platform in Singapore where primary offers of digital tokens are made will require being licensed under the SFA for one or more of their regulated activities, and
  2. Anyone providing financial advice in Singapore on ICOs is required to be legally authorised under the Financial Advisors Act.

Next steps

If this has whet your appetite, there’s likely more reading ahead in your future. We recommend the following resources: What is an ICO and is it right for my startup?, Everything you wanted to know about initial coin offerings but were afraid to ask [Tech in Asia] and The ultimate guide to developing ICO presentations [e27].

This article isn’t legal advice and shouldn’t be relied upon as such – we recommend speaking to a lawyer for tailored advice before proceeding with your ICO.

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