Majority of Token Sales in Singapore Must Be Vetted for Being Securities: MAS

Colin Muller

The Monetary Authority of Singapore (MAS) has issued a non-legally binding “guide” on how securities laws in the tiny country shall be applied to digital token offerings, including several example “case studies.”

The document’s main takeaway was a general review of which types of offerings and products must be reviewed by the MAS for compliance with the country’s Securities and Futures Act, or SFA - and the answer is most of them.

A wide net is cast by the MAS in this regard, saying they “will examine the structure and characteristics of, including the rights attached to, a digital token in determining if the digital token is a type of capital markets products under the SFA.” The selection of examples gives insight into how the MAS will consider token offerings, hewing to a utility/security token distinction that we have come to generally recognize.

No Exceptions?

Pretty much any digital token sale issued in the country will therefore have to be reviewed for its applicability by the SFA, before the issuing occurs. Therefore, any entity wishing to conduct a sale will have to register a “prospectus” with the MAS.

The MAS did issue some exceptions to the prospectus requirement, and it would appear that only a few token types could fall outside the MAS's review requirement. These are: offers not exceeding five million Singapore dollars within a yearlong sale; offers to fewer than 50 people within a year; and offers to institutional or accredited investors.

Importantly, all of these exceptions are caviated with the get-out-of-jail-free phrase “subject to certain conditions” - exceptions to the exceptions.

Inevitably, the MAS also expressed its concern for the institutional-crypto bugbears of financing of terrorism and money laundering. The usual anti-money-laundering and know-your-customer strictures are therefore applied to virtually all token holders, even those who fall outside the MAS/SFA remit.

Overall, the document was a methodical addition to the subject of which tokens fall under the SFA. This type of slow development is consistent with how Singapore has historically handled the nascent industry’s growth in its territory - somewhere in between Japan’s liberalism and China’s draconian control.

Different Than The US Interpretation?

It almost goes without saying at this point that defining which digital tokens are security products has become one of the most pressing and urgent issues for the cryptoasset industry. This discourse has of late been proceeding dramatically in the US, which remains the largest source of investment money into cryptoassets.

Two notable events have occured in the very recent past, which concern the ongoing question of legislating cryptoassets as securities in the US: the prosecution of EtherDelta’s founder Zachary Coburn by the US Securities and Exchange Commission (SEC) on charges of operating an illegal securities exchange; and a San Diego judge’s refusal to grant an injunction request of a token sale the SEC considered an illegally issued security - citing a failure to demonstrate its character of being a security.

The matter is surely not settled, at this point.