How to ICO/ITO in Singapore: A regulatory and compliance viewpoint on initial coin offering and initial token offering in Singapore by Malcolm Tan
How to ICO/ITO in Singapore: A regulatory and compliance viewpoint on initial coin offering and initial token offering in Singapore by Malcolm Tan
Singapore has become a hub of financial and technological innovation, thanks to its willingness to try new ideas and its commitment to encouraging businesses to both meet and exceed their goals. As part of its tech-centric outlook, the country has become a popular destination for entrepreneurs to perform their Initial Coin Offerings (ICO's) and Initial Token Offerings (ITO's). In this 1000-word article about how to ICO/ITO in Singapore, readers will gain a better understanding of the regulatory and compliance implications surrounding this popular form of capital raising.
Before getting into the technicalities, for those unfamiliar with ICOs/ITOs, it is first important to understand the concept behind this innovative way to raise capital and enter the market. Basically, it involves an entrepreneur or company selling a digital token or cryptocurrency on a specialised digital platform — usually blockchain-based — in order to raise capital to fund a product, business venture or idea. The token holds various rights and benefits, such as access to exclusive services, voting rights or the right to receive cash dividends.
Under Singapore law, ICOs/ITOs are classified as “securities”, and are therefore subject to the full scope of relevant laws and regulations. It is important to note that the regulatory standards in Singapore can vary depending on the type of ICO/ITO being performed. For example, digital tokens that are structured with the same characteristics as equity or which are used to exchange for a share of profits, would be treated as “Securities” under the relevant laws. Similarly, digital tokens with characteristics similar todebtor debt creation would also be treated as a “Security”.
It is, therefore, important for companies/individuals looking to perform an ICO/ITO in Singapore to first get legal advice from a qualified lawyer in order to ensure compliance with applicable laws.
This is especially true considering the complexity of conducting an ICO/ITO in Singapore, which is often done through a sale of units of futures contracts in a regulated trust ‘independently’ managed by intermediaries.
When it comes to the sale of digital tokens, there are several steps one must take to ensure they are compliant with applicable laws. Firstly, digital tokens must be ‘authorised’ in the relevant digital exchange. This process usually involves submitting a prospectus or information memorandum along with a token description and due diligence material. The digital exchange will assess the application and decide if the proposed digital token will qualify for listing. Once listed, the digital token must adhere to the standard KYC and anti-money laundering rules applicable to all securities offerings.
Furthermore, any company/individuals conducting an ICO/ITO must obtain prior authorisation from the Monetary Authority of Singapore (MAS). This is in accordance with the Securities and Futures Act (SFA) and its regulations, which require companies/individuals to obtain the permission from MAS to launch an ICO/ITO in Singapore.
In addition to the legal and regulatory requirements, one must also keep in mind the tax implications that come with running an ICO/ITO in a foreign country. As such, foreign entities are subject to Singapore’s tax laws and must pay any applicable tax to the Inland Revenue Authority of Singapore (IRAS). Furthermore, it is also important to note that the digital tokens themselves may be subject to taxation, and investors should therefore consult qualified legal or tax professionals in Singapore to make sure they are fully compliant with all applicable laws and regulations.
Finally, when running an ICO/ITO in Singapore, it is important to adhere to the highest standards of corporate governance, risk management, and transparency. Companies should have effective internal processes in place to ensure compliance with all laws and regulations throughout the entire process. Furthermore, detailed records should be kept of all transactions related to the ICO/ITO, such as the sale and distribution of digital tokens and any fees or commissions related to their sale.
In conclusion, it is important to understand the regulatory and compliance implications that come with conducting an ICO/ITO in Singapore. Anyone who is looking to do so should obtain professional advice from a qualified legal professional and ensure that they are up to date with the relevant laws and regulations. Furthermore, companies should adhere to the highest standards of corporate governance, risk management and transparency to ensure a fully compliant ICO/ITO process in Singapore.
