What rules and restrictions govern the conduct of and investment in security tokens in Singapore?


Prior to the launch of The Token RegRadar, we developed an article series, ‘Ask Me Anything…’, demonstrating the abilities of the new regulatory GPT embedded in to the platform. Since the revolutionary regulatory tool has been released, we decided to continue the theme through various articles examining prominent topics within the space. The question this time is “What rules and restrictions govern the conduct of and investment in security tokens in Singapore?” diving into the regulatory landscape of one of Asia’s frontrunners in embracing asset tokenisation and blockchain technology.

We will continue to reach out to our community to explore new topics to demonstrate and test the new regulatory GPT in the future, we encourage our readers to reach out with topics they want examined related to regulation in the asset tokenization space.

  • What rules and restrictions govern the conduct of and investment in security tokens in Singapore?
  • In Singapore, the conduct of and investment in security tokens are governed by the Securities and Futures Act (SFA) and the Financial Advisers Act (FAA). Here are the key rules and restrictions:

    Securities and Futures Act (SFA): The SFA is the primary legislation that governs the conduct of securities, futures, and related activities in Singapore. Security tokens are treated as “capital markets products” under the SFA, and therefore, the same rules that apply to traditional securities also apply to security tokens.

    Capital Markets Services License: Entities operating digital token platforms in Singapore are required to possess a Capital Markets
    Services License if they wish to conduct regulated activities under the SFA, such as dealing in securities, fund management, or providing custodial services for securities.

    Financial Advisers License: If the platform provides financial advisory services related to security tokens, it must also obtain a Financial Advisers License in accordance with the FAA.

    Extraterritorial Provisions: Singapore’s regulatory reach extends beyond its geographical boundaries. According to the extraterritorial provisions in the SFA, any person operating a platform for security tokens falls under Singaporean jurisdiction if they engage with Singaporean residents.

    Prospectus Requirements: For public offerings of security tokens, a prospectus must be filed with and registered by the Monetary Authority of Singapore (MAS), unless an exemption applies.

    Investor Protection: MAS emphasizes the importance of consumer protection. Investors are reminded to understand the benefits and risks of any product or service before committing to an investment.

    Regulatory Sandbox: Singapore has introduced a regulatory sandbox to foster the development of blockchain and fintech projects. This allows for certain security token platforms to operate in a controlled environment with regulatory support.

    MAS Guidelines: MAS classifies digital tokens into three primary categories: securities tokens, payment tokens, and utility tokens. The guidelines provided by MAS help determine when digital tokens might be subject to regulation under the SFA.

    AML/CFT Requirements: Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) requirements also apply to the conduct of security token offerings and platforms, necessitating proper checks and due diligence.

    Technology Neutral Approach: Singapore adopts a technology-neutral approach, meaning that security tokens are not subject to specific legislation targeting them but are treated in the same way as traditional securities to allow for technological advancements.

    These rules and restrictions are part of Singapore’s robust and adaptive legal framework that aims to foster innovation while ensuring compliance and consumer protection in the security token space.”

If you want to know more about a subject, you can simply ask the RegGPT follow-up questions or use The Token RegRadar’s other features like the search engine, the collection of law texts and more.

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Previously we’ve asked the AI:

“How can smart contracts encode compliance rules or regulations into digital assets and tokenized securities?”

What investor protection measures are suggested when dealing with security tokens or other digital assets?

How would you evaluate the developments we have seen globally in the asset tokenization space during the second half of 2023?

“In the second half of 2023, Hamilton Lane started tokenizing private funds on ADDX. Can you tell a bit about Hamilton Lane and explain how and why they did that? What are the main regulatory challenges of doing what Hamilton Lane is doing?”

“Can you briefly explain what the German Electronic Securities Act (Gesetz über elektronische Wertpapiere, eWpG) is all about?”

“Can you make a list of the most important Hong Kong laws regarding virtual assets?”

“I want to tokenize an asset in the US, but I am unsure of whether I need to make a prospectus and whether I am allowed to sell to retail investors and to investors outside the US. Can you provide me with a quick overview of the rules and the exemptions? I have heard that some of these exemptions have names like A, D and R, is that correct?”

“What rules and restrictions govern the conduct of and investment in security tokens in the US?”

What is the difference between security tokens and tokenized securities?

Image by Hu Chen from Unsplash

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