Our previous article in this series covered a step-by-step guide on how to purchase one’s first Bitcoin – covering all the necessary to-dos in order to have bragging rights for being part of the whole Crypto revolution. We now take a look at the need for (some form of) regulation in the industry, paying particular attention to Initial Coin Offerings and recent advice on the topic from both the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department’s (CAD).
The Need for Regulation
The world of Cryptocurrencies is anything but a beaten path. As investors and enthusiasts get used to blockchain technology and its many advantages, several governments also find themselves in a position where some form of regulation is necessary to ensure that its decentralised system doesn’t fall prey to those looking to illegally capitalise on its open nature.
There is a reason why financial regulation is necessary for any economy to thrive, and many believe that a hands-off approach in any industry – Cryptocurrencies not being immune – will contribute to criminal activities, including tax evasion and money laundering.
The Cryptocurrency world has been particularly enthralled by Initial Coin Offerings (ICO) that essentially entail relatively unregulated means of crowdfunding via Cryptocurrency. ICOs trade future cryptocoins in exchange for Cryptocurrencies of immediate, liquid value.
Advice on the Topic
Our local regulatory bodies have taken a measured approach to the world of Cryptocurrencies, releasing concrete advice on the subject to assist investors in protecting themselves.
The MAS has made clear its stand on the topic. The current securities regulatory framework requires that any offering of shares, debt instruments, or units in a collective scheme will have to comply with prospectus or exemption requirements (if any are applicable).
This was further highlighted after the U.S. Securities and Exchange Commission revealed that they may regulate ICOs, with Singapore stating that it would do the same if the investment takes on the form of a security. Our regulatory body also commented that they may take interest in ICOs that accept money from buyers who are Singaporean or those who are based here.
Both the CAD and MAS have been clear to highlight that investing in any scheme that operates online or overseas opens one to the risk of fraud. Offshore interests can be protected by their own regulations and also be difficult to verify if the investment goes south. A prudent approach when carrying out any trade that involves Cryptocurrencies was also advised – the sheer volatility as well as lack of security measures within these markets add to the justified concern.
The Need to Tread Carefully
The concerns that have prompted advice by these regulatory bodies are not unfounded – in the past 2 years, over 100 police reports have been filed here involving five such investment schemes (involving digital tokens and the like). Since the beginning of last year, the Consumers Association of Singapore (CASE) has received five complaints over digital currencies involving lack of pay outs after investing or unsatisfactory services related to these assets.
It is apparent that regulators worldwide are still gathering information on what these investment mediums will mean for their respective and global economies alike. In the mean time, what ICOs require are perhaps thorough evaluations of the rights conferred by the respective tokens issued. This should be followed by an equally comprehensive comparison against the definitions of each of the financial products regulated by those in charge of the jurisdiction in which they are issued. Regulation will strengthen confidence in the industry and in-turn help ICOs in achieving their target funding efficiently.