Offers of Digital Tokens (DTs)

The offers of digital tokens that are considered capital market products are regulated. Different regulations apply depending on the size of the offer and who it is being offered to.

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Depending on the characterisation of the digital token, the issuer might have to comply with the prospectus requirements under the Securities and Futures Act (Cap. 289) unless otherwise exempted, or obtain a licence under the Payment Services Act 2019.

"If the digital token constitutes a capital markets product under the Securities and Futures Act (Cap. 289) (“SFA”), then the issuer would have to comply with the prospectus requirements under the SFA for the digital token offering unless otherwise exempted.

If the digital token constitutes a regulated digital payment token, the issuer would likely have to obtain a licence under the Payment Services Act 2019 (“PSA”) for digital payment token services in order to carry out the digital token offering. If the digital token constitutes regulated e-money, the issuer would likely have to obtain a licence under the PSA for e-money issuance services in order to carry out the digital token offering. "

"Part XIII of the Securities and Futures Act (Cap. 289)
Section 5 of the Payment Services Act 2019"

Offers of sale of digital tokens are regulated in Singapore if the digital tokens constitute "capital markets products" under the Securities and Futures Act ("SFA"). Under the SFA, "capital market products" include shares, debentures, units in a business trust, units in a collective investment scheme, derivatives contracts, spot exchange contracts for the purposes of leveraged foreign exchange trading, or such other products which MAS may prescribe.

For example, a digital token may constitute a share if it confers or represents ownership interest in a corporation, represents liability of the token holder in the corporation, and represents mutual covenants among the other token holders in the corporation. A digital token that represents the indebtedness of an issuer of the digital token in respect of the money of a token holder deposited with the issuer constitutes a debenture. The structure and characteristics of a digital token must be examined in determining if a digital token falls within the ambit of the SFA.

When a digital token constitutes a "capital market product", the offer of the digital token may only be made to the retail public if the offer complies with, among other things, the prospectus requirements set out in Part XIII of the SFA, unless the offer is made pursuant to the exemptions from such requirements including the following:

a. An offer that is made to a pre-identified person (personal) and it is a small offer that does not exceed S$5 million (or its equivalent in a foreign currency) within any 12-month period, subject to certain conditions (including advertising restrictions);
b. An offer that is made to no more than 50 persons within any 12-month period, subject to certain conditions (including advertising restrictions);
c. An offer that is made to institutional investors (as defined under the SFA) only;
d. An offer that is made to accredited investors (as defined under the SFA) and certain other persons, subject to certain conditions (including advertising restrictions).

Offers that are made to the following types of investors may be exempted from the prospectus requirements:

a. Institutional investors: In general, these include financial institutions that are regulated in Singapore, foreign financial institutions that are regulated by a regulatory body equivalent to MAS, collective investment schemes, pension funds, entities that carry on the business in dealing in bonds with accredited investors or expert investors, governments, etc.

b. Accredited investors and certain other persons: These include:

i. Individuals whose net personal assets exceed in value S$2 million (or its equivalent in a foreign currency), whose financial assets (net of any related liabilities) exceed in value S$1 million (or its equivalent in a foreign currency) or whose income in the preceding 12 months is not less than S$300,000 (or its equivalent in a foreign currency); and
ii. Corporations with net assets exceeding S$10 million in value (or its equivalent in a foreign currency); or
iii. Where individuals or corporations have opted in to be treated as accredited investors.

However, these exempted offers are still required to comply with certain conditions prescribed in the SFA including selling restrictions and, for offers to the accredited investors, the advertising restrictions.

For more information, please click here for the MAS "Guide to Digital Token Offerings".