Out-Law / Your Daily Need-To-Know

Crypto businesses urged to review products in light of regulatory scrutiny

29 May 2018, 1:44 pm

Businesses involved in the trading of crypto assets, such as digital currencies and tokens, should review the extent to which they are subject to regulation in light of increased regulatory scrutiny in the market, an expert has said.

Bryan Tan, a technology law expert at Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, the law firm behind Out-Law.com, highlighted action taken by the Monetary Authority of Singapore (MAS) as evidence of the regulatory risks cryptocurrency businesses face.

Last week, MAS announced that it had served a warning to eight "digital token exchanges" of the need to obtain MAS authorisation if facilitating trading in digital tokens that constitute securities or futures contracts.

MAS also ordered an issuer of an 'initial coin offering' (ICO) to stop offering its digital tokens in Singapore. It found that the issuer was in breach of Singapore's Securities and Futures Act because it had not provided a "MAS-registered prospectus" to prospective investors who the issuer was seeking to attract as equity owners of a company through the issue of digital tokens.

Lee Boon Ngiap, assistant managing director of capital markets at MAS, said: "The number of digital token exchanges and digital token offerings in Singapore has been increasing. We do not see a need to restrict them if they are bona fide businesses. But if any digital token exchange, issuer or intermediary breaches our securities laws, MAS will take firm action. The public should be aware that there is no regulatory safeguard if they choose to trade on unregulated digital token exchanges or invest in digital tokens that fall outside the remit of MAS’ rules."

Tan said the action taken by MAS "emphasises the need to study the regulatory regime for these new products in order to navigate it properly".

In the UK, the Financial Conduct Authority (FCA) has also confirmed that it is currently looking into whether 24 cryptocurrency businesses that are not currently authorised by it are carrying out activities that are regulated and require authorisation.

In response to a freedom of information (FOI) request submitted by New Model Adviser, the FCA said that it "may investigate and take action, identifying and determining the most serious matters which pose the greatest risk to consumers" if it finds the non-authorised companies are carrying out regulated activities.