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Singapore announces a new and tougher stance on the regulation of ICOs and digital tokens

In response to the continued rise in Initial Coin Offerings (ICOs) in Singapore, The Monetary Authority of Singapore (MAS) has announced that it will fall into step with the USA by, where appropriate, using their Securities and Futures Act (Cap. 289) to regulate any offer involving the issuance of digital tokens.  

An ICO is basically a new way to generate funding for a business.  Digital tokens are given to investors in return for more traditional currencies and, given the growing popularity of digital currency, it is a type of transaction that is gaining ground quickly on the more traditional and more established IPO (Initial Public offering).  Nevertheless, the ICO isn’t without risk.
 
More and more reports are surfacing of ICOs being used as a revenue generator by criminals.  The most common threat is that the ICO is fraudulent and the company and/or crypto-currency involved in the offer aren’t real.  However there are also reports that, because of the anonymous nature of an ICO and the fact large sums of money can be raised quickly, it is becoming a vehicle for both money laundering and terrorist financing.  

This is something the MAS have already picked up on.  In March 2014 they stated publicly that they would strive to examine any intermediaries involved in virtual currency transactions for possible links to money laundering or terrorist financing.  They have now committed to assessing the level of risk associated with activities involving digital tokens that do more than act as a virtual currency.

Singapore is not alone in not regulating virtual currencies but they are one of the first countries to openly admit digital tokens have evolved into much more than a virtual currency and, as they are now commonly used to represent a share of ownership in an asset or property and therefore represent a debt owed by the issuer, they should be answerable to their Securities and Futures Act.  

As such the issuers of any tokens will now be required to lodge and register a prospectus with MAS before offering their tokens (unless they meet any of the clearly set out exemptions) and the issuer or any intermediary involved will need to be licenced under both the Securities and Futures Act and the Financial Advisers Act and pass the anti-money laundering and terrorism financing examinations.  Similarly any platforms enabling the secondary trading of digital tokens will also have to be approved as an approved exchange or recognised market operator by the MAS.
 
As lawyers who specialise in resolving all types of disputes involving digital currency and digital tokens including ICOs and binary options, we are here to help.  If you have fallen victim to any form of digital fraud, please call 020 7792 5649 or email us at info@selachii.co.uk today. 

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