Be wary of digital token investments: Police, MAS

Be wary of digital token investments: Police, MAS”

The Monetary Authority of Singapor (MAS), along with the Commercial Affairs Department (CAD) have published a warning to consumers regarding Initial Coin Offerings (ICOs) or Token Offers and other investment schemes involving digital coins.

Like the August 1 clarification, today's announcement cautions that token offerings are prone to illegal activity, like money laundering, due to the anonymity of transactions and the ease with which funds can be raised quickly.

The authorities noted that the function of digital tokens has evolved beyond a virtual currency. 'Such digital tokens have been marketed as investment opportunities'.

MAS tells consumers to check if a person or entity is regulated by them before participating in any ICO or Token offer.

Most important, MAS notes, is that the potential investors understand well the product and what is being offered to them. The central bank said a consumer is exposed to heightened risk of fraud when investing in schemes that operate online or outside Singapore. The exchanges or platforms that facilitates secondary trading of digital tokens may not be regulated by MAS.

In a nutshell, MAS recommends consumers to make sure they fully understand the benefits and risks of the product or service before committing and assess whether the features of the product or service offered meets their needs.

When digital tokens do not hold any ownership rights to the seller's assets, it means the tokens are not backed by tangible assets. Consumers may not be able to exit their token investments easily.

The advisory further warns that consumers dealing with individuals or entities that aren't regulated by the MAS will forgo any consumer protection otherwise afforded to them under the law.

There is also the risk that investors would not be able to "cash in" their tokens, even if they are tradable on the secondary market.

Song Seng Wun, an economist at CIMB Private Banking in Singapore, said: "It's small but growing in the overall scheme of things. regulators are rightly nervous".

In fact, Goldman Sachs analyst Robert Boroujerdi said that it will be hard for institutional investors to ignore virtual currencies, especially with a total market value of $120bn, with Bitcoin and Etherium rallying up to 200% and 2,500% this year, respectively, according to a Business Insider report. We are in a digital age and digital tokens seem a logical extension, and while regulators like to see new things, the risks are high.

"There is no regulation at all to protect investors, and you do not know what they are promising. There's no certainty that the White Paper contains relevant and sufficient disclosure, or that the information has been properly verified".

Mr Anson Zeall, chairman of Access, the Singapore Cryptocurrency and Blockchain Industry Association, urged its members to seek legal advice and comply with SFA regulation prior to conducting an ICO.

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