Compliance
Singapore Sends Stern Warning To Investors About ICOs

Singapore's central bank and regulator has issued further advice to potential investors in Initial Coin Offerings.
Singapore's regulator and its commercial affairs watchdog has
warned investors to conduct thorough due diligence before
participating in Initial Coin Offerings (ICOs), a week after
the city-state said it would look to regulate these controversial
fundraisers.
“Members of the public are advised to exercise due diligence to
understand the risks associated with ICOs and investment schemes
involving digital tokens,” the Monetary Authority of Singapore
and the Commercial Affairs Department said in a
statement.
The warning comes just weeks after the US' most prominent
regulator, the Securities and Exchange Commission, took aim at
ICOs and said it
would subject them to the same regulations as traditional
securities sales.
ICOs have gained momentum in recent years as digital currency
entrepreneurs increasingly use them to raise millions quickly by
creating and selling digital tokens with no regulatory oversight.
It has been said that because many tokens are listed and traded
on crypto-currency exchanges, large holders could gain more
price-controlling powers. Some ICOs have faced criticism as they
failed to accurately disclose token distribution, such as what
proportion of tokens would be held by founders.
In its most recent note, the MAS penned a list of risks for
prospective ICO investors to be aware of, building on its
comments made last week that ICOs are “vulnerable to money
laundering and terrorist finance due to the anonymous nature of
the transactions”.
The regulator says investors are “exposed to a heightened risk of
fraud” when investing in “schemes [ICOs]” outside of Singapore,
as it is difficult to verify authenticity and harder to recover
money in the event of a scam.
Because most ICOs are conducted by start-ups, the “failure rate
tends to be high,” the MAS said, cautioning investors not to fall
victim to false promises of sky-high returns on investments.
“Consumers should be wary of investment schemes involving digital
tokens that promise high returns,” the MAS said. “The higher the
promised returns, the higher the risks.”
Regardless of turning a profit, investors may struggle to even
sell their tokens, the MAS says, claiming there is often not
enough appetite from buyers. “In the worst case scenario where no
secondary market develops, a consumer may not be able to
liquidate his token holdings at all,” the MAS said. The watchdog
notes that token exchanges may not regulated and are therefore
more susceptible to fraud.
The MAS has also weighed in on the valuation of digital tokens,
suggesting that this is “usually not transparent, and highly
speculative” and, as a result, investors could lose their entire
investment and render digital tokens “worthless”.