The Monetary Authority of Singapore has cleared up its position on the regulation of digital tokens. The central bank noted that it will regulate the offer or issue of digital tokens in Singapore if they constitute products regulated under the Securities and Futures Act (SFA).
This clarification came amidst the recent increase in the number of initial coin offerings (ICOs) in the city-state as a means of raising funds.
MAS defines digital token as a cryptographically-secured representation of a token-holder's rights to receive a benefit or to perform specified functions.
"A virtual currency is one particular type of digital token, which typically functions as a medium of exchange, a unit of account or a store of value," the central bank said in a statement.
It noted that ICOs are prone to money laundering and terrorist financing (ML/TF) risks due to the anonymous nature of the transactions and the ease of raising large sums of money in a short period of time.
In an earlier statement, MAS pointed out that while virtual currencies per se were not regulated, intermediaries in virtual currencies would be regulated for ML/TF risks.
With this, the central bank is currently assessing how to regulate ML/TF risks associated with activities involving digital tokens that do not function solely as virtual currencies.
Meanwhile, MAS stated that its position of not regulating virtual currencies is similar to that of most jurisdictions. It observed that the function of digital tokens has evolved beyond just being a virtual currency.
"For example, digital tokens may represent ownership or a security interest over an issuer's assets or property. Such tokens may, therefore, be considered an offer of shares or units in a collective investment scheme under the SFA. Digital tokens may also represent a debt owed by an issuer and be considered a debenture under the SFA," MAS explained.
The regulator noted that issuers of digital tokens would be required to lodge and register a prospectus with MAS prior to the offer of such tokens unless there is an exemption.
"Issuers or intermediaries of such tokens would also be subject to licensing requirements under the SFA and Financial Advisers Act and the applicable requirements on anti-money laundering and countering the financing of terrorism," the regulator furthered.