Monetary Authority of Singapore Spells Out When ICOs Are A Security

The central bank of Singapore has become the latest financial authority to clarify its position on initial coin offerings, spelling out exactly when an ICO should and should not be treated as a security.

The Monetary Authority of Singapore, which serves as the jurisdiction’s de facto central bank, published fresh guidelines for ICOs this week, amid concerns that a lack of clarity was leading to confusion in how ICOs should be regulated.

Their position reflects similar attempts by authorities around the world to clarify the legal position on ICOs. Most notably, the U.S. Securities and Exchange Commission has previously set out parameters for when ICOs should be considered securities.

The distinction is significant because if an ICO is not a security, it falls outside the scope of securities regulations, including requirements around listing rules.

According to the guidance published by the Monetary Authority of Singapore, ICOs that fall within the scope of their legal definition of securities will be subject to oversight from the authority.

“Offers or issues of digital tokens may be regulated by MAS if the digital tokens are capital markets products under the SFA. Capital markets products include any securities, futures contracts and contracts or arrangements for purposes of leveraged foreign exchange trading.”

The guidelines also include several case studies, demonstrating instances where an ICO would be required to be regulated under securities laws, and instances where no such oversight would apply.

The case studies refer specifically to the example of a token for a computer processing power exchange, which would not be deemed a security, and the example of a token attached to a startup investment fund, which would be deemed to be a security under an ordinary interpretation of the guidelines.

However, even for those tokens that are not regulated as securities, the Monetary Authority of Singapore was keen to point out that other laws could still come to bear on how these instruments were sold.

“Digital tokens that perform functions which may not be within MAS’ regulatory purview may nonetheless be subject to other legislation for combating money laundering and terrorism financing.”