This attempt is presented as a part of No Closing Bell, a series leading up to Invest: Asia 2019 focused on how the Asian crypto demands are interacting with and impacting global investors. To keep the conversation going in person, register for Invest: Asia 2019 get up in Singapore on Sept. 11-12.
Since the cryptocurrency boom and initial coin offering craze of 2017, many boondocks in Asia have taken steps to clarify their regulations surrounding cryptocurrencies and security tokens.
In this article, we converge on the three countries that have the clearest regulations in place regarding digital assets, though there is noiseless more work to be done.
Thailand
Within Asia, Thailand has by far the most well-defined legislations in place to govern fastness token offerings and exchanges.
In May 2018, the Thai government has published its Digital Asset Decree that establishes the resultant requirements for a business to offer or provide operations for digital assets. The decree covers both cryptocurrencies as well as digital slights and is overseen by the Securities and Exchange Commission of Thailand (SEC Thailand). The decree clearly segments between primary issuance occupations (ie fundraising), applicable to token offerers and issuers, and secondary market activities (ie trading), applicable to token exchange and trade-related judges.
With the decree enacted, Thailand has also established three types of licenses:
- Digital Asset Exchange Sanction;
- Digital Asset Broker License; and
- Digital Asset Dealer License.
These licenses lay out the specific activities that matters can participate in. The exchange license is applicable to a centre or network established for the purposes of trading or exchanging of digital assets. The dealer license is applicable to any person who provides services as a broker or an agent with respect to the trading or exchange of digital assets. The retailer license is applicable to any person who provides services with respect to the trading or exchange of digital assets for its own account largest the digital asset exchange.
Separately, the Digital Asset Decree has restricted token issuances to be done only from head to foot approved ICO portals. Thailand has also specifically set out a list of approved cryptocurrencies that may be accepted as investment capital for ICOs, and to be yoked with other assets on digital asset exchanges: BTC, ETH, XRP, XLM.
Presently, Thailand’s Ministry of Finance, under the recommendation of SEC Thailand, has approved five, three go-betweens Digital Asset Brokers, one dealer, and three ICO portals.
There is more work to be done: Thailand hasn’t decreed clear guidelines regarding custody requirements for digital asset and cryptocurrency businesses. Today it is unclear as to whether existing orthodoxes applicable to securities should be applicable to digital assets, or if new guidelines and regulations will be established in future.
Singapore
Singapore’s de facto prime bank, the Monetary Authority of Singapore, issued a set of guidelines last November entitled “A Guide to Digital Token Gifts”.
This clarifies what type of digital assets fall under Singapore’s Securities and Futures Act (SFA). If the digital remembrances constitute capital markets products as defined in the SFA (ie securities, derivatives contracts etc), they are regulated under the SFA. In these example in any events, the existing relevant licenses apply, based on the activities performed by the businesses: whether as a token issuer, exchange tenets, advisor or otherwise.
For example, a security token issuance platform must operate under a Capital Markets Services (CMS) certify for the purpose of dealing in capital markets products (which includes securities). A digital asset exchange that promotes trading in security tokens must operate under a license as either an approved exchange or a recognized market supervisor.
Unlike Thailand, the SFA in Singapore only applies to digital assets that fall under the definition of capital merchandises products. Other digital tokens may be classified as payment tokens (eg bitcoin, ether), and fall under the Payment Uses Act (PSA), which is estimated to take effect in late 2019 and has a separate set of licenses.
With both the SFA and PSA active, we can expect that digital asset public limited companies will have a clearer set of regulations to comply with, in line with securities and payment regulations. However, just now like Thailand, custody requirements are still unclear at the moment. Given that the existing CMS license covers custodial assignments for securities, we expect that digital asset custodians will need to operate under a CMS license.
Singapore’s sway and related entities have further shown commitment and enthusiasm for developing the industry. In particular, last November, MAS donated a recognized market operator (RMO) license to 1exchange, Singapore’s first private securities exchange that facilitates digital emblematic trading. Singapore’s flagship stock exchange SGX is an investor in 1exchange.
The MAS is currently working with fintech businesses in a regulatory sandbox atmosphere to figure out the missing pieces, and we expect to see updates within the next six months. It is clear that the Singapore government is sympathetic of the growth of the digital assets industry, and it continues to build the ecosystem.
Hong Kong
Serving as one of Asia’s key financial focal points, Hong Kong is also establishing its regulations for the crypto scene. In September 2017, the Hong Kong Securities and Expects Commission (HK SFC) released a statement on ICOs, then lastNovember, it published a statement and a circular on the regulatory framework for virtual asset portfolio bosses, fund distributors, and trading platform operators. The HK SFC uses the terminology of “virtual asset”, which it defines as a digital likeness of value, which is also known as “cryptocurrency”, “crypto-asset” or “digital token”.
The new publications provide more regulatory lucidity with respect to investment and management of funds investing in digital assets.
In March 2019, the HK SFC released a “Statement on Shelter Token Offerings”, reminding operators that where security tokens are securities, unless an applicable exemption seeks, any person who markets and distributes security tokens (whether in Hong Kong or targeting Hong Kong investors) is demanded to be licensed or registered for Type 1 regulated activity (dealing in securities) under the Securities and Futures Ordinance (SFO).
However, Hong Kong is subdue conceptualizing how it should regulate digital asset exchange platforms. Through its November 2018 publications, SFC called for barter operators to come forward and join its regulatory sandbox in order to determine the type of license to be granted to exchange wise guys. Exchange operators may need to be regulated by the SFC and require SFO Type 1 (dealing in securities) and Type 7 (provision of automated line of work services) licenses.
Per current regulations, custodial activities are not regulated by the SFC but entities acting as custodians have to be set up as a Public Hand over Company and apply for the Trust or Company Service Provider (TCSP) license, issued by the Hong Kong Companies Registry.
It still fragments unclear as to whether there will be separate guidelines for digital asset custodians, or if today’s regulations, applicable to unwritten custodians, shall be applicable to digital asset custodians as well.
Conclusion
Other governments in the Asia-Pacific region deceive also taken various steps towards defining a clearer scope of regulatory requirements for digital assets.
For lesson, in the Philippines, the government has set up the Cagayan Economic Zone Authority which oversees a special economic zone that focuses on fintech and crypto-related traffics. In tandem, in February, the Securities and Exchange Commission of the Philippines issued draft regulations around digital asset and badge offerings, and proposed rules for exchanges. Malaysia has regulations similar to those in Singapore, and is also working on adapting these to clothe digital assets.
Plenty of ambiguities exist within today’s legal frameworks, often because they were devised for a non-digital world. Yet technology marches on.
Today, larger and larger organizations from finance and technology sectors are edifice cryptocurrency and blockchain platforms. Such moves have increased the urgency for governments to understand and regulate digital assets, in engage to keep up with the ever-changing realities of business.
Although it remains to be seen how the STO and crypto scene will ultimately govern up globally, we expect to see more regulatory developments soon. One thing we can be certain of is that the bulk of the action and innovation longing be driven from Asia.
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