ICOs Regulations In Singapore – Complete Guide

If you are interested in delving into the world of cryptocurrency in Singapore, it is crucial to consider the regulations surrounding Initial Coin Offerings (ICOs). 

Singapore has been recognized as “the city with the finest investment potential” and “the world’s smartest city” by the World Economic Forum, thanks to its remarkable advancements in the FinTech industry in recent years, and has also established a prominent presence in the cryptocurrency space. Below, you can find further details on the ICO regulations in Singapore.

WHAT EXACTLY IS AN INITIAL COIN OFFERING (ICO)?

An initial coin offering (ICO) is the cryptocurrency sector’s version of an initial public offering (IPO).  An ICO can be launched by a company looking to generate funding for the creation of a new coin, app, or service.

Interested investors can participate in an initial coin offering to get a new cryptocurrency token issued by the company. This token may have some usefulness connected to the product or service that the company is selling, or it may simply represent an interest in the company or project.

HOW DOES AN ICO WORK?

When a cryptocurrency project decides to seek funds through an ICO, the first stage is for the project organizers to decide how the ICO will be structured. ICOs can be organized in a variety of ways, including:

• Fixed supply and pricing – A company can choose a financing goal or limit, which implies that each token sold in the ICO has a predetermined price and the overall token supply is fixed.
• Dynamic pricing and fixed supply – An ICO can have a fixed token supply and a dynamic financing objective, which implies that the amount of money raised in the ICO decides the total price per token.
• Dynamic supply and fixed pricing – Some ICOs feature a dynamic token supply but a fixed price, which means that the supply is determined by the amount of financing received.

HOW TO SET UP AN ICO IN SINGAPORE

The first thing to be aware of is that private companies in Singapore are the only ones permitted to create ICOs. Initial coin offers (ICOs), which can only be issued by private companies, and initial public offerings (IPOs), which public companies issue, differ primarily in this regard.

In Singapore, registering a business with ACRA is the initial stage in issuing an ICO. The corporation can then establish a cryptocurrency that will be exchanged in order to raise money for the business’s future growth. At present time, no license is required for the distribution of ICOs, but the MAS will examine the digital tokens before they are distributed.

WHAT ARE THE MAIN STEPS OF LAUNCHING AN ICO IN SINGAPORE?

In Singapore, both domestic and international investors can launch initial coin offerings to produce virtual currency that they can then sell. However, there are a few factors to take into account to ensure that the platform is operating lawfully.

The primary actions for starting an ICO in Singapore are:

• Create a white paper outlining the objectives of the initial coin offering; 
• Register a company with the Singapore Accounting and Corporate Regulatory Authority; 
• Create a digital token or use one that is already widely used; 
• Develop a marketing strategy for the platform where it will be sold; 
• Apply for the necessary licenses with the Singapore Monetary Authority if the digital token falls under the rules of the SFA;
• Create a platform (website) or register with a platform where ICO projects are promoted.

WHY IS SINGAPORE A GOOD OPTION FOR ICOS?

• Singapore has acquired the term “jurisdiction of choice” for ICOs due to its favorable regulatory treatment of the crypto boom, which has helped build a cryptocurrency and Blockchain system in the country.
• In essence, ICOs are essentially unregulated if the tokens provided do not qualify as securities under Singapore legislation (more on that in a moment).
• The Monetary Authority of Singapore (MAS), Singapore’s central financial regulatory authority, simply holds ICO participants accountable for conducting independent legal due diligence on their own and addressing any risks associated with money laundering and financing terrorism during token issuance.

WHAT IS THE ROLE OF MAS IN SINGAPORE’S ICOS?

• The Monetary Authority of Singapore (MAS) is the primary regulator in the ICO field since it supervises and administers the country’s rules governing money, insurance, banking, securities, and currency issuance.
• MAS issued “A Guide to Digital Token Offerings” in November, which detailed how Singapore securities rules related to digital token issues or offers. The advice said that digital token issuance or offers may be regulated if the digital token is classified as a capital markets instrument under the Securities and Futures Act.
• The SFA defines “capital markets goods” as all sorts of securities, and future contracts, including arrangements and contracts for leveraged foreign exchange trading or foreign exchange trading.
• MAS has also mentioned that while it does not control virtual currencies in and of themselves since they are not recognized as securities or legal cash, it does regulate virtual currency intermediaries due to their relationship with different terrorist financing and money laundering issues.
• It’s also fair to say that the MAS has seen how the purpose of some of these digital tokens has evolved beyond being just virtual money over the years.

WHAT ARE THE NEW ICO REGULATIONS IN SINGAPORE?

The MAS now maintains that when digital tokens form securities or units in a collective investment plan, a prospectus is required, and they may be subject to recognition and authorization procedures. The prospectus requirement may be waived if the ICO: –

1. Does not exceed S$5 million (about US$3.7 million)
2. Is a private placement provided to no more than 50 people in a 12-month period?
3. Under certain instances, it is offered to accredited or institutional investors.

MAS has also introduced a few additional licences for the following: –

1. Anyone running a cryptocurrency platform in Singapore that makes primary offers of digital tokens must be licensed by the SFA for one or more of their regulated operations.
2. Under the Financial Advisors Act, anybody giving financial advice on ICOs in Singapore must be legally authorized.

If you require a more detailed explanation regarding the ICO regulations in Singapore, send us an enquiry at enquiry@relinconsultants.com. Here at Relin Consultants, we have competent crypto specialists who are able to guide you through the ICO regulations, as well as other crypto-related aspects. 

MAIN DIFFERENCE BETWEEN ICOS AND IPOS IN SINGAPORE

What distinguishes ICOs from IPOs, in particular, is a common question among investors. Even though they function the same, there are some significant variations between the two types of endeavors. In contrast to the IPO, the ICO, first of all, is not subject to the same regulations and licensing requirements. The ICO is suitable for start-up businesses in contrast to the IPO, where the company is required to have a track record and go through a rigorous MAS certification. As a result, starting an ICO is simpler than starting an IPO.

WHAT ARE THE OPPORTUNITIES FOR CRYPTOCURRENCY IN SINGAPORE?

• Crypto-friendly approach – Singapore’s crypto-friendly attitude and flexible regulatory framework provide an atmosphere conducive to development and innovation in the FinTech industry. MAS has been a strong supporter of Bitcoin start-ups and enterprises exploring cryptocurrency and Blockchain technology. This welcoming environment has attracted numerous large crypto enterprises from countries including  Australia, Japan, and China to set up shop in Singapore.
• Increased consumer trust in licensed crypto-operators – The licensing structure established by the Payment Services Act (PSA), as well as the ICO regulations mandated by the MAS, will aid in increasing customer trust in Singapore’s crypto firms. Customers will also feel more confident in putting their faith in licensed crypto operators.
• Clear and concise regulations – Some cryptocurrency sector stakeholders praised MAS’s regulatory revisions, particularly the licensing structure under the PSA. Major crypto firms, like Japan’s Liquid Group Inc. and London’s Luno, have stated a desire to seek a MAS license, which provides regulatory clarity and assurance to crypto firms operating in Singapore.

If you are interested in setting up a Singapore company for crypto purposes, do not hesitate to reach out to at enquiry@relinconsultants.com