Unlike traditional cryptocurrency “ICOs,” or initial coin offerings, “STOs,” or security token offerings, allow investors to have access to assets correlated to the digital coins. For example, people who buy into an STO of company X may be able to get dividends, shared profits, or even interest from the coins that they purchase in the STO of that company.
Traditional ICOs are generally not tied directly to assets related to the offering company and are therefore believed to be significantly weaker investments by many people. For this reason, STOs are being touted as a potentially strong alternative to traditional ICOs.
However, because STOs are so new, there is some uncertainty about how governments around the world will regulate them. One country in particular that many people are wondering about is Singapore.
Singapore has so far been one of the most supportive countries in the world regarding cryptocurrencies and is viewed to be on the cutting edge. Here is how the nation of Singapore is approaching STOs from a regulatory standpoint.
The Monetary Authority of Singapore’s Approach
The Monetary Authority of Singapore is the government agency that is responsible for handling STO regulations in the nation. In general, this governing body has been mostly very supportive of cryptocurrencies. That is why Singapore is something of a cryptocurrency hub.
Like a number of other different governing bodies, the Monetary Authority of Singapore separates utility tokens, from payment tokens, and the newer, security tokens. Regarding these classes of cryptocurrencies, representatives from MAS has stated that they do not want to “regulate the technology itself, but rather, its purpose.”
According to MAS, digital tokens classify as securities if they function as capital markets products and not just a way for users to use an app or a platform.
Essentially, MAS is trying to be very liberal when it comes to cryptocurrency and STO regulations in order to help them flourish. However, STOs in Singapore will be subject to the Securities and Futures Acts and will be regulated like securities.
Regarding STOs and digital tokens that have characteristics of traditional securities, MAS said in its Guide to Digital Token Offerings, “Offers of digital tokens which constitute securities, securities-based derivatives contracts, or units in a CIS, are subject to the same regulatory regime under Part XIII of the SFA, as offers of securities, or securities – based derivatives contracts or units in a CIS respectively made through traditional means.”
So, any company who offers security tokens in the nation of Singapore in the future will have to make sure that their STO is fully compliant with securities laws in the country. In the Guide to Digital Token Offerings, MAS also stated that it “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 product.”
MAS has been enforcing these laws and has even sent warnings to eight digital token exchanges in Singapore regarding offering tokens for sale that qualify as securities and which do not have MAS’ approval yet. So, these laws are being taken very seriously.
In order to help blockchain to thrive in Singapore, the MAS has even gone as far as to partner with the Singapore National Exchange. The goal of this partnership is to improve operational efficiency and to reduce settlement risks. Companies such as Anquan, Nasdaq, and Deloitte will even be allowed to be technology partners for the project.
Despite the fact that STO regulations will be subject to securities laws in Singapore, this is just to protect investors. In general, the nation and its financial regulatory bodies have proven themselves to be very supportive of cryptocurrencies, and it appears that this trend will continue with STOs.
It looks like Singapore could become a center for security token offerings in the near future if STOs prove to be a viable alternative to ICOs. This is good news for any company that would like to set up and STO in the country to give investors access to tangible assets like dividends or interest, instead of just offering them a utility or payment token.