With the consecutive lawsuits filed by the U.S. SEC against two cryptocurrency exchange giants, the cryptocurrency industry is gradually transitioning from its initial wild growth phase to becoming more compliant. Apart from Bitcoin and Ethereum, which have not been classified as securities by the SEC, over 50 cryptocurrencies have been categorized as securities by the SEC, including even BUSD, widely considered a stablecoin, while the remaining survivors might be only exempt due to their small scale.
The nature of cryptocurrency remains financial, and the financial industry is inherently highly regulated, using rules to counteract inherent human greed and bad behaviour. Without understanding regulations, navigating the cryptocurrency industry can be challenging.
In addition to the significant actions taken by the U.S. SEC, other countries and regions have their own initiatives. Of particular concern are the two major financial centres in Asia, Hong Kong and Singapore, with their cryptocurrency-related policies attracting significant attention.
Why has the US SEC taken action？
The SEC was of the view that various cryptocurrencies are unregistered securities. According to the SEC, under US law, these assets would be viewed as investments where purchasers of the assets are expecting to earn profit from others’ efforts. Some of the named cryptocurrencies were also accused of having inappropriate marketing, indicating the growth in token price with a view to encouraging investors to buy their tokens for outsized profits. Setting aside the regulatory angle, some implications of and hidden risks behind “unregistered securities” are:
– The issuance structure, process flow or risk management measures might be unsound.
– Investors might not receive comprehensive information disclosure.
– The executive team might lack professional finance know-how.
– Underlying assets might not be properly segregated.
For the above reasons and others, the SEC has publicly condemned these projects. It should be noted that the above points are all circumstances which can adversely impact investors. Furthermore, the cryptocurrency industry is known to have incidents of price manipulation (‘pumping and dumping’), which is prohibited in the financial sector.
In other words, if an asset has not properly registered as a security and fulfilled the compliance standards imposed by regulators, investors in such cryptocurrency assets would have to purely rely on their trust of the relevant project teams. Investors expect those teams to deliver expected products in the future. But for teams without a proper track record, this kind of trust can only be justified as a result of FOMO (fear of missing out) in a certain market movement, which could well end up as a financial market meltdown in the near future.
As a regulatory compliant DEX based in Singapore, DigiFT follows a rigorous registration process for the assets issued on our platform to provide maximum protection for investors. Below, we proceed to share Singapore’s legal framework for security tokens as well as some of our practical experiences in facilitating security token issuance.
The role of regulation in finance
Singapore is one of the largest financial centres in Asia. The Monetary Authority of Singapore (MAS) has been proactive in creating a supportive environment for the development of innovative financial technologies. Singapore also has a well-established legal system, strong infrastructure, and a business-friendly environment. With Singapore’s competitive tax policies (e.g. low corporate tax, tax incentives for startups, and no capital gain tax), Singapore continues to attract investors to its shores.
The purpose of MAS’s regulation is to protect investors, which has benefits for the whole financial system. The messaging from MAS and the broader government have been quite clear. In Jan 2022, MAS released its Guidelines on Provision of Digital Payment Token Services to the Public, reiterating that MAS has consistently warned the public that digital payment tokens (DPTs), which cryptocurrencies are classified as under Singapore laws, is highly risky and not suitable for the general public. In August 2022, the Managing Director of MAS, Ravi Menon, stated at a Greenshoot event: “Yes to Digital Asset Innovation, No to Cryptocurrency Speculation”. The Deputy Prime Minister and Minister of Finance, Lawrence Wong, has also stated: “… Cryptocurrencies are a different matter [from security tokens]. [Cryptocurrencies] are purely speculative as an investment asset and have no intrinsic value. That is why MAS has consistently warned the retail public not to deal with them.”
Besides protecting investors, from a company’s perspective, being compliant can also have various benefits, such as:
– Minimizing legal and compliance risk.
– Building trust and credibility with stakeholders.
– Improving operational efficiencies and risk managements.
– Promoting responsible and sustainable business.
Of course, being compliant comes with costs, including regulatory costs, services restrictions, and privacy issues.
It is also important to note that decentralization does not necessarily mean deregulation. Regulations require a company to establish proper governance and internal controls, and developing a compliant company is a slow and steady process.
So how does the Singapore government regulate crypto? Let’s have a deep dive into Singapore’s crypto regulatory framework.
How does the Singapore Government regulate crypto?
Payment Service Act (“PSA”)
The main legislation for cryptocurrency in Singapore is Payment Service Act (“PSA”), and it’s regulated by the Monetary Authority of Singapore (“MAS”). Under the PSA, most cryptocurrencies are considered as Digital Payment Tokens (“DPT”). Currently, if you are buying or selling crypto as a service or operating an exchange, which involves exchange between a DPT and another DPT or between DPT and fiat currency, you will need a licence under PSA for providing the DPT services. Once the Payment Services (Amendment) Act (“PS(A)A”) comes into force, if you are handling crypto in any way, as a service, you will likely need a licence under PSA for providing the services involving DPT. The scope of DPT services basically will expand significantly under the PS(A)A.
Securities and Futures Acts (“SFA”)
Another main legislation is security token regulatory regime, the Securities and Futures Acts (“SFA”). Any cryptographic token that is deemed as a security (“security token”) needs to comply with the relevant provisions of the SFA. To be in the business of offering security tokens, it potentially require either one or both of the following two licenses: Recognised Market Operator (“RMO”) license, which is to operate a security token exchange, and Capital Market Services (“CMS”) license, which is to market capital market products (“CMPs”), for example, securities, funds, etc.
Under SFA’s definition, CMPs means any securities, units in a collective investment scheme, derivatives contracts, spot foreign exchange contracts for the purposes of leveraged foreign exchange trading, and such other products as the Authority may prescribe as capital markets products. Here, unlike U.S SEC using “Howey test”, “securities” means:
– Shares, units in a business trust or any instrument conferring or representing a legal or beneficial ownership interest in a corporation, partnership or limited liability partnership.
– Debentures, or
– Any other product or class of products as may be prescribed.
SFA regulates those CMPs, with all perspectives regarding what, who and how. For example, SFA controls which services are CMP-related and who can offer them (licensing), what one needs to do to sell CMPs (e.g., disclosure), how one can market or advertise CMPs (restrictions), and what penalties are imposed if one breach those provisions.
Our practice: DigiFT, a regulatory-compliant DEX in MAS Sandbox
Of course, being a DEX in MAS’s Fintech Sandbox, DigiFT’s business model is in line with all the regulations mentioned above. Since the blockchain is an unprecedentedly transparent, accurate, complete, and timely data ledger, it can enable real-time execution, clearing and settlement, without using intermediaries. Building an exchange based on blockchain can dramatically increase efficiency and reduce costs, and that’s what DigiFT is currently building.
DigiFT is the first and only regulatory compliant DEX currently in MAS Sandbox. Some might say that as a decentralized exchange, ‘regulatory compliance’ is a grey area. However, DEXes can also be regulated, albeit with a different paradigm and legal freamwork. The main purpose is to create a fair, orderly, and transparent marketplace. Besides the relevant legal and compliance frameworks and documentation, from a technological perspective, DigiFT has developed several features to achieve that goal:
– Frontrunning prevention. MEV (Maximal Extractable Value) affects billions of dollars of trading volumes every week. The root cause of MEV is the informational advantage held by certain traders, creating an unfair market situation that needs to be avoided. DigiFT addresses MEV by ensuring that all transactions submitted during a block are settled in the same price, which means MEV bots would be unable to benefit from slotting front-running transactions.
– Circuit break implementation. In extreme market conditions, circuit breaker mechanisms can protect the market by preventing excessive volatility and sharp fluctuations. They help mitigate systemic risks, provide the market with a cooling-off period, and prevent the spread of panic sentiment. DigiFT has implemented circuit breakers for each security token in line with expected price fluctuations to ensure that excessive price volatility is minimised.
– Robust legal structure and asset segregation. DigiFT provides investors with robust legal frameworks for all the assets on the platform, with assets custodied on qualified custodians. Investors’ own assets are self custodied to have full self-control of their own wallets.
– Know your customer (“KYC”) + Know your wallet (“KYW”) + Know your transactions (“KYT”). While the blockchain is an anonymous environment, anti-money laundering (“AML”) and counter-terrorism financing (“CFT”) regulations require identity verification for real-world individuals. Through combining KYC with KYW measures performed on customers’ wallet addresses, and by tracing transactions associated with those wallets, we can achieve real-time monitoring for suspicious financial activities.
Challenges and future directions
New technologies, particularly in the financial sector, require collaboration between professionals and regulators. It is important to broaden the boundaries of technological use and enhance social efficiency while maintaining system order. Communication and understanding take time, and in the vibrant cryptocurrency field, new technologies and innovative applications continue to emerge. Compliance in the Web3 industry still has a long way to go, but for DigiFT, we intend to continue making slow but steadfast progress on this journey.
About DigiFT
DigiFT aims to provide regulated decentralized finance solutions on the Ethereum public blockchain. We are operating the first regulation-abiding decentralized digital asset exchange where asset owners can issue blockchain-based security tokens efficiently and cost-effectively. Investors can trade with continuous liquidity via an AMM mechanism and retain control over digital asset tokens in their own wallets. We are a global outfit backed by well-established venture partners. The founding team originates from international financial institutions and has deep blockchain technology knowledge.
For more information, please contact:
Disclaimer:
This article and its contents are prepared solely for informational purposes only and do not replace independent professional judgement. Under no circumstances should the information contained herein be used or considered as an offer to sell, or solicitation of an offer to buy any security. The content of this presentation is proprietary and no part of it may be reproduced or redistributed without the prior written consent of DigiFT Tech (Singapore) Pte. Ltd. (“the Company”). This article contains public information as of the specified date, and may be stale thereafter. No representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the article and the information contained herein and no reliance should be placed on it. None of the Company, its advisers, connected persons or any other person accepts any liability whatsoever for any loss howsoever arising, directly or indirectly, from this article or its contents. All information, opinions and estimates contained herein are given as of the date hereof and are subject to change without notice. This material should not be viewed as advice or recommendations with respect to asset allocation or any particular investment.
新加坡合规指南：来自符合监管要求的去中心化交易所的实践
随着美国证券交易委员会（SEC）对两家加密货币交易所巨头连续发起的诉讼案，加密货币行业正逐渐从最初的野蛮生长阶段过渡到更加合规的状态。超过50种加密货币已被SEC归类为证券，甚至包括被广泛认为是稳定币的BUSD。除了比特币和以太坊未被SEC归类为证券外，其余幸存者可能仅因规模较小而幸免于难。
加密货币的本质仍然是金融，而金融行业天然需要严格的监管，通过规则来抵制人性固有的贪婪。在不了解监管的前提下，参与加密货币行业可能会面临诸多挑战。
除美国证券交易委员会（SEC）采取的重大行动外，其他国家和地区也出台了各自的举措。尤其引人注目的是亚洲两个主要金融中心：新加坡和香港，它们的加密货币相关政策吸引了相当大的关注。
SEC 为何下此重手？
美国证券交易委员会（SEC）认为多种加密货币属于未注册证券。根据SEC的观点，在美国法律下，这些资产被视为投资，购买者期望从他人的努力中获得利润。其中一些被指控的加密货币还被指责存在不适当的营销和市场操纵行为，如通过暗示代币价格来鼓励投资者购买其代币以获得利润。除了监管角度之外， “未注册证券” 存在以下一些含义和隐藏风险：
– 发行结构、流程或风险管理措施可能不健全。
– 投资者可能未能获得全面的信息披露。
– 高管团队可能缺乏专业的金融知识。
– 底层资产可能未得到适当的分离。
由于上述原因以及其他原因，美国证券交易委员会（SEC）公开谴责了这些项目。值得注意的是，上述观点都是针对可能对投资者产生不利影响的情况。此外，加密货币行业已知存在的部分价格操纵（”炒作和抛售”）行为，在金融行业是被禁止的。
换句话说，如果一种资产未能正式注册为证券并符合监管机构的合规标准，投资者在这种加密货币资产上将只能完全依靠对相关项目团队的信任,期望这些团队能在未来交付预期的产品。但对于没有业绩记录的团队来说，这种信任只能被解释为是对某种市场行情中的FOMO（“Fear of missing out”）的结果。
作为在新加坡符合监管的去中心化交易所，DigiFT遵循严格的资产注册流程，以最大程度保护投资者。下面，我们将介绍新加坡的证券法律框架以及我们在促进证券型代币发行方面的一些实践经验。
金融行业监管的作用
新加坡是亚洲最大的金融中心之一。新加坡金融管理局（MAS）一直在积极营造支持创新金融技术发展的环境。新加坡拥有健全的法律体系、强大的基础设施和良好的商业环境。凭借新加坡具有竞争力的税收政策（例如低企业税、对创业公司的税收激励措施和无资本增值税），新加坡持续吸引投资者的到来。
MAS 的监管目的是保护投资者，这对整个金融体系都有好处。MAS 及新加坡政府的态度非常明确。2022 年 1 月，MAS 发布了《向公众提供数字支付代币服务的指导方针》，再次强调 MAS 一直警告公众，数字支付代币（包括加密货币在内）属于新加坡法律下的高风险资产，不适合普通公众投资。2022 年 8 月，MAS 常务董事 Ravi Menon 在一个活动上表示： “对于数字资产创新持肯定态度，对于加密货币投机持否定态度” 。副总理兼财政部长 Lawrence Wong 也曾表示： “…加密货币是另外一回事[与证券代币不同]。[加密货币]纯粹是作为投资资产的投机对象，没有内在价值。” 这就是为什么 MAS 一直警告零售公众不要参与其中的原因。
除了保护投资者之外，从企业的角度来看，合规还有多种好处，例如：
– 降低法律和合规风险。
– 与投资者建立信任和信誉。
– 提高运营效率和风险管理能力。
– 推动可持续的业务发展。
当然，合规也会带来成本，包括监管成本、业务限制和隐私问题。
同时，值得注意的是，去中心化并不一定意味着没有监管。监管要求企业建立适当的治理和内部控制，建立合规的企业是一个缓慢而稳定的过程。那么，新加坡政府是如何对加密货币进行监管的呢？让我们深入了解一下新加坡的加密货币监管框架。
新加坡政府如何监管加密货币？
支付服务法令（Payment Service Act，“PSA“）
新加坡加密货币的主要法规是支付服务法（”Payment Service Act”，简称 PSA），由新加坡金融管理局（”Monetary Authority of Singapore”，简称 MAS）进行监管。根据 PSA，大部分加密货币被视为数字支付代币（”Digital Payment Tokens”，简称DPT）。目前，如果作为服务提供商进行加密货币的买卖或运营交易所，涉及DPT与其他DPT之间或DPT与法定货币之间的交换，需要根据 PSA 获得提供 DPT 服务的许可。一旦《支付服务法修正案》（”Payment Services (Amendment) Act”，简称PS(A)A）生效，那么以任何方式处理加密货币，作为服务提供商，都可能需要根据 PSA 获得提供涉及 DPT 的服务的许可。根据 PS(A)A，DPT 服务的范围基本上将显著扩大。
证券与期货法令（Securities and Futures Acts，“SFA”）
另一项主要法规是证券与期货法令（”Securities and Futures Acts”，简称 SFA），针对证券的监管体系。被视为证券型代币（”security token”）的任何加密代币都需要符合 SFA 的相关规定。要从事提供证券型代币业务，可能需要获得以下两种或两种以上的许可证：受认可市场运营商（”Recognised Market Operator”，简称 RMO）许可证，用于经营证券代币的交易所；资本市场服务（”Capital Market Services”，简称 CMS）许可证，用于营销资本市场产品（”CMPs”），例如证券、基金等。
根据 SFA 的定义，CMPs 指的是任何证券、集体投资单位、衍生品合约、用于杠杆外汇交易的现货外汇合约，以及任何由当局规定为资本市场产品的其他产品。与美国 SEC 使用的”豪威测试”（Howey test）不同，在这里， “证券” 有明确的定义，指的是：
– 公司的股份、商业信托单位或任何表示对公司、合伙企业或有限责任合伙企业的法律或利益所有权利益的工具。
– 公司债券。
– 任何其他可能被规定的产品或产品类别。
SFA 对这些资本市场产品进行全方位的监管，涵盖了其涉及的内容、提供方和操作方式等各个层面。例如，SFA 控制哪些服务与资本市场产品相关，并规定了谁有权提供这些服务（许可证），销售资本市场产品需要满足的要求（例如信息披露），如何进行资本市场产品的市场营销或广告宣传（限制），以及违反这些规定将面临的处罚。
来自符合监管的去中心化交易所的实践
当然，作为在 MAS 金融科技监管沙盒中运营的去中心化交易所，DigiFT 的业务模式符合上述所有的法规要求。由于区块链是一个前所未有的透明、准确、完整和及时的数据账本，它可以实现实时执行、结算和清算，无需借助中介机构。建立一个基于区块链的交易所可以极大地提高效率并降低成本。
有人可能会说，去中心化交易所，是一个 “监管合规” 的灰色地带。然而，尽管采用了不同的范式和法律框架，去中心化交易所也可以受到监管。合规的主要目的是创建一个公平、有序和透明的市场，除了符合上述相关的法律和合规框架和文件，从技术的角度来看，DigiFT 还开发了一些功能来实现这一目标：
– 预防抢跑交易。 MEV （最大可提取价值）每周影响以太坊上数十亿美元的交易，MEV 是去中心化交易所面临的一大问题，根本原因是某些交易者拥有信息优势，从而创造了一个不公平的市场情况，这是我们需要避免的。DigiFT 通过确保在一个区块中提交的所有交易都以相同的价格结算，来解决 MEV 问题，这意味着 MEV 机器人将无法从抢先交易中获利。
– 熔断机制。在极端市场情况下，熔断机制可以保护市场，防止市场的过度波动，有助于减轻系统性风险，为市场提供冷静时间，防止恐慌情绪的传播。DigiFT 针对每种证券实施了熔断机制，以符合预期的价格波动，来最大程度避免过度的价格波动。
– 健全的法律结构和资产隔离。DigiFT 为平台上的所有资产提供了健全的法律框架，链下资产由合格的托管方进行托管。链上资产由投资者自行托管在钱包中，完全由投资者自己掌控。
– Know your customer (“KYC”) + Know your wallet (“KYW”) + Know your transactions (“KYT”) 。虽然区块链是一个匿名的环境，但反洗钱（AML）和反恐融资（CFT）法规要求对真实世界的个人进行身份验证。通过将用户身份认证与对客户钱包地址关联，以及实时交易分析措施相结合，并跟踪与这些钱包相关的交易，来实时监测可疑的金融活动。
What’s Next?
新技术，特别是金融领域的技术，需要专业人员和监管机构的合作。在维护系统秩序的前提下，拓宽技术使用的边界，提升社会效率非常重要。沟通和理解需要时间，在活跃的加密货币领域，新的技术和应用创新不断涌现。Web3行业的合规工作还有很长的路要走，但对于DigiFT来说，我们会在这个旅程中坚实前行。
关于 DigiFT
项目介绍: DigiFT 由张之皓——前华美银行大中华区首席执行官、花旗银行和渣打银行中国区副行长，于 2020 年创立，其管理团队在传统金融机构和金融科技领域拥有丰富经验。 DigiFT 的愿景是整合中心化与去中心化金融的优势，是目前第一家，同时也是唯一一家进入新加坡金融管理局（MAS）金融科技监管沙盒的去中心化交易所。DigiFT 在以太坊公链上提供符合监管的去中心化金融方案，部署自动做市商（AMM）机制，促进由债券、股权等金融资产作为底层支持的证券型通证的二级市场交易流动性。
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