Singapore takes important steps in supporting the cryptocurrency ecosystem

The Monetary Authority of Singapore (MAS) has made two announcements that should bring cheer to the crytocurrency community.

Posted by Jun on June 14, 2018
Earlier this year, I wrote in an earlier article that Singapore could be the most favoured jurisdiction for ICOs. In the past few weeks, the Monetary Authority of Singapore (MAS) made two important announcements that provided much welcomed clarity on its regulatory attitude towards cryptocurrency in Singapore. As both of these are good news, crypto-enthusiasts should be rubbing their hands in delight.
 
MAS sounds warning shot

 

What happened

 

 

 

MAS announced on 24 May 2018 that it has warned eight digital token exchanges in Singapore not to facilitate trading in digital tokens that are securities or futures contracts without authorisation from MAS. In addition, MAS ordered an ICO to be halted because the tokens offered represented equity ownership in a company and therefore breached the securities regulations in Singapore. The issuer of the tokens returned all funds received from Singapore-based investors.

Why it matters

 

 

 

 

This was the first time MAS made public enforcement actions that it had taken. While the tone is seemingly negative, it should not spook the crypto-community in Singapore. There are several positive takeaways. First, it affirms that digital token exchanges that trade only non-security tokens can operate legally in Singapore. Secondly, it shows that there is active enforcement in Singapore, which should help weed out opportunistic ICOs that want to take investors for a ride by promising returns. Thirdly, the MAS allowed the issuer to take remedial actions and did not seem to take a hard-line approach – it did not even publicly name the non-compliant ICO

What’s next

 

 

 

Don’t expect the MAS to weed out all non-compliant ICOs. The MAS has admitted in a media response that it is very difficult to verify operations of issuers that are located outside Singapore. It will be challenging for investors to recover funds against fraudulent ICOs. Always remember, caveat emptor – if you are not prepared to lose all your money, walk away.

 

Regime for decentralised crypto-exchanges

What happened

 

 

 

In a nod towards P2P (peer-to-peer) trading, the MAS has proposed new regulatory framework for market operators. Put simply, market operators are entities that facilitate trading. In its consultation paper, the MAS set out two possible frameworks that accomodate decentralised crypto-exchanges that operate without intermediaries - the RMO* Tier 3 and Tier 1.

*RMO stands for registered market operators.

Why it matters

 

 

 

 

 

 

The positive regulatory stance is reassuring. P2P exchanges trading security tokens could arrive in Singapore in the near future.

The RMO Tier 3 represents that best option for P2P exchanges that wish to facilitate trading of security tokens. The capital requirements are proposed to be reduced to S$50,000, which shouldn’t be a problem for big players in the cryptomarket. What’s most interesting is that the application process is based on self-certification, which means you report to the MAS whether you have complied with certain requirements. The review period by MAS is unbelievably quick - just 4 weeks!

What’s next

 

 

 

 

 

 

 

 

 

 

 

 

Unfortunately, the good news does come with bad news - the safeguards and limitations on a RMO Tier 3 holder. First, the not-so-bad news: you can only have revenue of up to S$10 million yearly.

Now comes the real bad news: you can only trade with fellow license holders and not individuals (not even expert investors). This makes the attractiveness somewhat muted - your RMO Tier 3 crypto-exchange can only succeed if there are multiple license holders active in the security token market. Trading through license holders (which adds an intermediary) is somewhat ironic in a regime that is meant to support P2P/decentralised trading.

Is there another way to manage risk?* I think so. I am hopeful that retail investors/individuals can be allowed to trade if they are restricted by annual or monthly trading limits.

*email us at info.mediumfork(at)gmail.com if you have any suggestions or proposals!