MAS, CAD warn about investment schemes based on digital coins and tokens

The Commercial Affairs Department (CAD) and the Monetary Authority of Singapore (MAS) have jointly issued a consumer advisory against the potential risks of digital tokens and virtual currency-related investment schemes.
The Commercial Affairs Department (CAD) and the Monetary Authority of Singapore (MAS) have jointly issued a consumer advisory against the potential risks of digital tokens and virtual currency-related investment schemes. PHOTO: REUTERS

SINGAPORE - Consumers who are considering buying into an investment based on digital coins or tokens may want to think again.

The Commercial Affairs Department (CAD) and the Monetary Authority of Singapore (MAS) have jointly issued a consumer advisory against the risks of digital tokens and virtual currency-related investment schemes.

Referring to the emergence of initial coin offerings (ICOs), and other investment schemes involving digital tokens here, the advisory said: "Members of the public are advised to exercise due diligence to understand the risks associated with ICOs and investment schemes involving digital tokens." 

The warning came on the back of a clarification from MAS last week that such ICOs will face regulation here if they are structured like securities, debt or units in a collective investment scheme under the Securities and Futures Act (SFA).

The authorities noted that the function of digital tokens has evolved beyond a virtual currency. For example, these digital tokens may represent ownership or a security interest over the token seller's assets or property, or a debt owed by the seller. Such digital tokens have been marketed as investment opportunities.

ICOs and other investment schemes involving digital tokens may be structured in many ways with different business propositions. For example, they may seek to develop a new digital platform while others may offer an opportunity to invest in a property, business and assets, or with a promise of certain benefits or monetary returns.

 
 

The CAD and MAS advised that where sellers of digital tokens fail to highlight the risks, consumers should make the effort to find out more  about the underlying project, business or assets.

Some of the risks include the promises of high returns which could come in the form of high referral commissions, that is, promising consumers benefits for referring additional participants. In fact, such commissions would increase operating costs, which could lower the chances of achieving the returns, the consumer advisory said.

Consumers who suspect that an investment scheme involving digital tokens could be fraudulent should report such cases to the police.