SINGAPORE Law and Practice Contributed by: Tju Liang Chua and Ulanda Oon, Drew & Napier LLC
evant activity, the regulatory analysis does not change in principle – the fund itself will need to assess wheth- er its activities require a licence under the PS Act, SFA and/or FSMA. Depending on the fund’s structure and activities, certain exemptions may be available that would not otherwise be available to individual inves - tors, for instance, if the fund takes in accredited and institutional investors (among other exemptions). The fund manager may need to hold a CMS licence for fund management under the SFA, or qualify for a licensing exemption. Additionally, regulated firms and investment funds with digital assets exposure remain subject to applicable prudential requirements and conduct-of-business requirements imposed by MAS under the SFA. Broadly, these business conduct requirements include but are not limited to the fol- lowing: • implementing and maintaining appropriate robust risk management, compliance and governance frameworks; • safeguarding and segregating customers’ assets, including for funds investing in digital assets, stor- ing the bulk of assets in cold wallets; • identifying, managing and disclosing conflicts of interest, and establishing effective complaints han- dling procedures; • compliance with AML/CFT obligations; and • for funds with digital assets exposure, making spe- cific disclosures to investors regarding its height- ened risks. See also 2.2 Crypto-Asset Regulatory Frameworks . 2.4 Token Issuance The requirements for the launch of an ICO or token generation event (TGE) differ depending on its struc- ture. Assuming that the digital asset does not consti- tute a CMP, the sale of such digital assets may con- stitute the provision of a DPT service where the digital asset falls within the definition of a DPT, and where it does, the entity conducting the ICO will require a licence under the PS Act. Whether a particular ICO or TGE triggers the licensing requirement will depend on the nature of the digital asset and the activities being undertaken; for instance, an airdrop of digital assets that amounts to a gift rather than a sale may
fall outside the scope of the PS Act licensing regime in certain circumstances. From a tax perspective, proceeds from the sale of digital assets may be subject to income tax where they are revenue in nature and Singapore-sourced. See also 1.2.4 Tax . As regards whitepaper or other disclosure require- ments, Singapore does not impose a standalone statutory obligation to publish a whitepaper for the issuance or sale of digital assets that do not constitute CMPs. Where the digital assets constitute CMPs, then prospectus requirements mandating disclosure of cer- tain information such as the issuer’s information and financials, apply unless otherwise exempted. However, where the digital asset is a DPT and the enti- ty issuing or selling it is regulated under the PS Act, the entity has to ensure that its published DPT list- ing and governance policies and procedures address the criteria, due diligence and processes applied by the DPTSP and fees received by the DPTSP to pro- vide DPT services for DPTs. This in turn feeds into the disclosure requirements required by the DPTSP from an operations point of view. For instance, the DPTSP may require information on the governance model, market capitalisation, liquidity and technical aspects of the underlying network to be disclosed to the DPTSP. While such information need not be set out in a whitepaper, for practicality, most do so to minimise documentation. 2.5 Market Abuse Unlike traditional securities laws that render market abuse and insider trading statutory offences, there is no equivalent legal framework for digital assets that do not constitute CMPs generally. However, entities licensed under the PS Act must miti- gate potential issues arising from conflicts of interest that may arise from the vertical integration of DPT trading activities. Hence, while there is no statutory prohibition against insider trading or market abuse, there are operational restrictions licensed entities (and their related entities) must comply with. For instance, a DPTSP that operates a market should not allow any related corporation to conduct an over-the-counter
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