Singapore’s financial regulator would consider trialling some initial coin offerings in a regulatory sandbox, if such fundraising efforts are by companies focused on new technology that will improve the efficiency of capital markets.
The type of digital-token sale that the Monetary Authority of Singapore would consider is one underpinned by technology that improves capital markets, for example smart contracts or something that can build a “smarter” initial public offering, MAS Chief Fintech Officer Sopnendu Mohanty said Wednesday in an interview.
“If we get some use case which we have not seen, then they could come to a regulatory sandbox,” Mohanty said on the sidelines of the Singapore FinTech Festival. So-called sandboxes allow companies to test their innovations in a loosely regulated environment before releasing them publicly.
Regulators around the world are grappling with how to treat ICOs, which have raised more than $3.5 billion on promises to revolutionize everything from supply chains to the world of finance, but have also attracted its share of scammers.
“There’s a bunch of ICOs which are selling the Taj Mahal, selling residences on Mars,” Mohanty said. “Be careful of these.”
Such attempts are not something the MAS would deem suitable for a sandbox, said Mohanty, who joined the MAS in 2015 when the regulator formed a new group to oversee its push into fintech. He was previously with Citigroup Inc.
China has banned ICOs, Hong Kong regulators are looking into ICOs to protect small investors and the U.S. Securities and Exchange Commission is monitoring digital coin sales after warning in July that ICOs and cryptocurrency exchanges are subject to U.S. law.
Like most jurisdictions, the MAS doesn’t regulate cryptocurrencies directly, but rather the activities surrounding them. Singapore requires digital-currency intermediaries such as exchange operators to comply with requirements to combat money laundering and terrorism financing. Those that resemble a sale of securities are already regulated under the Securities and Futures Act in Singapore.
Later in the day, the MAS released a circular clarifying the application of those laws to ICOs. The guide included parameters when a token offering deemed to be a security might be exempt from certain prospectus requirements, and emphasized that such tokens may also be subject to legislation for combating money laundering and terrorism financing.
The coin offerings “which we believe we should support, is when the ICO is doing something technologically different to make the existing capital markets efficient,” Mohanty said, adding that the MAS hadn’t seen any such examples.
“As a regulator, if I can send a signal that we are looking for this bucket, it is empty,” he said. “Drop an ICO there, we will help you to succeed.”