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Digital tokens: US regulation has no bearing on Singapore

The issue or offer of digital tokens could fall outside the scope of Singapore's securities laws even if the activity is found to be subject to US law, the city state's central bank has said.05 Dec 2018

The Monetary Authority of Singapore (MAS) confirmed that the scope of Singapore's regulation of digital tokens is not determined by how the US regulates them in updated guidance on digital tokens it has issued. The guidance is aimed at clarifying how the country's Securities and Futures Act (SFA) and Financial Advisers Act (FFA) apply to the business around cryptoassets.

Technology law expert Bernice Tian of Pinsent Masons MPillay, the Singapore joint venture partner of Pinsent Masons, the law firm behind Out-Law.com, said: "Using a number of case studies, MAS has clarified their position on how certain tokens may or may not fall within the scope of the SFA. In particular, MAS has stated that the ability for a digital token to be traded on the secondary market alone does not, in itself, result in the token being construed as a capital market product under the SFA."

"Furthermore, the treatment of a token under US laws is also not a consideration for deciding whether the token constitutes a security under Singapore laws. Token issuers should consider whether the features of their token are such that the token is a type of capital market product that falls within the ambit of the SFA," she said.

In its guidance, the MAS confirmed that businesses that directly offer or issue digital tokens, as well as intermediaries such as online platforms that facilitate the offer or issue of digital tokens, and financial firms that provide investment advice on those cryptoassets, are subject to potential regulation in Singapore.

The MAS first clarified the regulatory position on digital tokens last year. The new guidance has now gone further, including by explaining how proposed new payment services laws might apply to cryptoassets, said Tian.

"The amended guide includes references to the new Payment Services Bill (PSB) that was recently introduced before Singapore's parliament," Tian said. "According to the PSB, a person carrying on a business of providing any service of dealing in digital payment tokens or any service facilitating the exchange of digital tokens must be licensed. License-holders would be required to put in place anti-money laundering and counter-terrorist financing processes to address money laundering and terrorism financing risks."

"The new case studies provided by the MAS in its guidance provide helpful clarification on how existing securities laws and the upcoming PSB may be applied to certain types of digital payment tokens. Digital payment token issuers whose token features differ substantially from the examples provided in the case studies may also approach MAS for guidance on the application of the SFA and the PSB, using the checklist that has been provided in the guide," she said.

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