Singapore clarifies ICO rules

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Singapore Exchange (SGX) has added more clarity to the rules for publicly listed companies planning to conduct initial coin offerings (ICOs).

Last week, Tan Boon Gin, CEO of the stock exchange’s regulatory subsidiary, SGX RegCo, published an article on the SGX website, emphasised the following: “It is important to make clear that even if an SGX-listed company is the issuer of a digital token, those tokens are not listed on SGX. Therefore, SGX’s rules would cover only the company and not the tokens nor the holder of the tokens.”

If a listed company wishes to hold an ICO it must consult the SGX in advance, as well as provide a legal opinion on the nature of tokens and an auditor’s opinion on how the ICO should be treated for accounting, and these reports must come from “reputable” firms.

Companies will also be required to disclose the following: “the rationale behind the ICO, the risks involved, how the raised funds would be used, planned know-your-customer (KYC) and anti-money laundering (AML) checks, and any impact on existing shareholders’ rights.” Additionally, companies will have to “ensure that ICOs are “properly” accounted for in their financial statements and that associated risks have been addressed.”

And if the tokens are considered to be securities, which means they come under Singapore’s Securities and Futures Act (SFA) they will have to provide a detailed prospectus and complete a licensing procedure. Furthermore, they may have to set up a subsidiary company to run the ICO. On the plus side,

MAS — Singapore’s central bank — takes the view that digital tokens that can be used to pay for goods and services, but which do not have additional rights attached to them, may not have similar characteristics as securities. Therefore these digital tokens would not be regulated under the SFA.

Gin also said, “The issuer’s board is ultimately responsible for maintaining a robust system of risk management and internal controls,” which means listed issuers of ICOs must protect their own interests and those of shareholders.

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