SICC decision in B2C2 v Quoine is groundbreaking. A few comments:
1. Cryptocurrency is deemed akin to property which can be held on trust. Significance: crypto assets will be ringfenced if trustee becomes insolvent.
2. Cryptocurrency exchange platform (or any other type of digital exchange) must expressly contract for the right to reverse trades in certain scenarios.
3. In determining the application of the legal doctrine of unilateral and common mistake, the court considered the knowledge and intent of the programmer of the trading algorithm—whether the algo was intended to be opportunistic of mistakes. Strangely, it’s possible that if a human was the one who executed the same trades, the doctrine may apply to deny the plaintiff’s claim.
4. Significance: legal doctrine is being bent by algorithm and technology. This decision may pave the approach for application of doctrine to scenarios of automated technology replacing human actors.
5. Remedy in this case was not return of the cryptocurrency because of the substantial value increase since the events. Instead damages were to be assessed. This may matter if the defendant is cash light.
Continue reading “Case Update: B2C2 Ltd v Quoine Pte Ltd  SGHC(I) 3 – SICC decides on cryptocurrency trade dispute”
So you are a tech startup who want to raise funds. You figure that instead of incurring debt, issuing equity, entering into convertible loan agreements (CLA), you will conduct an initial coin offering (ICO) or digital token sale. Not least because the amounts of money which have been raised by recent ICOs are huge. (I am using ICO because it is a shorter well-recognised abbreviation than “digital token sale”, even though the term ICO may be a bit of a misnomer.)
For every ICO that makes headlines, there are probably many ICOs which fall far below the issuers’ expectations. A lot of this of course is based on investors/purchasers’ sentiment and speculation. But some of that is also dependent on a few things like good marketing, viable underlying business model or technology, a credible team, and fair and reasonable terms of sale. If you do wish to build credibility for your ICO, there are some things which you would want to consider from a legal, regulatory perspective.
Continue reading “Article: So you want to conduct an initial coin offering (ICO) or digital token sale?”
JUST IN. MAS Guide to Digital Token Offerings.
The case studies are very helpful in illustrating MAS’ position on whether certain scenarios fall within regulated activities under the Securities and Futures Act (SFA) or Financial Advisers Act (FAA).
Case study 1: tokens only give access rights to token issuer’s platform and pay for services on the same–not subject to SFA or FAA.
Case study 2: tokens to represent share in company which plans to develop property. Will constitute securities under SFA. Company may need to apply to be licensed financial adviser. Company will need to comply with prospectus requirements.
Case study 3: tokens enable holders to receive profits from company’s investments in a portfolio of shares in companies. Token holders have no powers relating to operations or management. Will constitute collective investment scheme (CIS). Company will need to comply with prospectus requirements, and likely will need to apply for capital markets services (CMS) licence.
Case study 4: token holders receive profits from investment in shares of portfolio of companies. Token issue not available to persons in Singapore. Part XIII of SFA will not apply. But company may be carrying on business of fund management in Singapore and may thus need to apply for CMS licence.
Case study 5: tokens represent loan by investor to startup. Token will be deemed a debenture and thus securities under the SFA. Company facilitating purchase or sale of token may require CMS licence.
Case study 6: company plans to set up virtual currency exchange platform. On the premise that no products regulated under SFA will be traded, SFA will not apply. If any token constitutes securities under SFA, then company may be operating a securities market and thus need to be approved as an exchange by MAS.
On 1 August 2017, MAS issued a press release clarifying its approach to initial coin or token offerings (ICO) or token issuance or sales. This note provides some comments on MAS’ clarification. It is of significant interest because there have been several ICOs conducted in Singapore recently, and has thus attracted interest in prospective issuers looking to raise funds by way of ICO. This comes shortly after the US Securities and Exchange Commission (SEC) announced that certain ICOs would amount to “securities”.
Continue reading “MAS clarifies approach to ICO or token sales”