On 10 August 2017, the Commercial Affairs Department ("CAD") and the Monetary Authority of Singapore ("MAS") jointly issued a consumer advisory against the potential risks associated with digital tokens and virtual currency-related investment schemes. The consumer advisory, posted on the website of MAS, comes on the back of a clarification issued by MAS on 1 August 2017 that initial coin offerings ("ICOs") may be regulated under the Securities and Futures Act (Chapter 289) of Singapore if the underlying tokens fall within the definition of "securities".
CAD and MAS have observed that the function of digital tokens has evolved beyond a virtual currency and may have been marketed as investment opportunities. ICOs and other investment schemes may be structured in many ways with different propositions such as seeking to develop a new digital platform, offering an opportunity to invest in a property, business and assets or promising certain benefits or monetary returns.
CAD and MAS have advised that in situations where sellers of digital tokens fail to highlight the risks, consumers should exercise precaution and make an effort to find out more information about the underlying project, business or assets. The non-exhaustive list of risks highlighted by CAD and MAS in the consumer advisory include heightened risks of fraud when investing in schemes that operate online or outside Singapore, risks relating to sellers without a proven track record, risks relating to insufficient secondary market liquidity, risks relating to highly insufficient speculative investments, risks relating to investments promising high returns and risks of money laundering and terrorist financing.
Consumers should be mindful of potential risks and should ensure that they fully understand the benefits and risks of the product or service before committing. If the need arises, they should ask the seller questions to fully understand the investment opportunity and check if the information provided by the seller on itself or on the scheme is true. They should also check the seller's or its representative's credentials and assess whether the features of the product or service offered meets their needs before committing to any investment.
The joint consumer advisory text may be found here.
This article is produced by our Singapore office, Bird & Bird ATMD LLP, and does not constitute legal advice. It is intended to provide general information only. Please contact our lawyers if you have any specific queries.