MAS, CAD warn public of potential risks of digital tokens and related investment schemes

THE Commercial Affairs Department (CAD) and the Monetary Authority of Singapore (MAS) on Thursday advised consumers to be mindful of potential risks of digital token and virtual currency-related investment schemes.

A digital token is a cryptographically-secured representation of a token-holder's rights to receive a benefit or perform specified functions. One particular type of digital token is virtual currency like Bitcoin and Ether.

CAD and the MAS have noted the emergence of initial coin (or token) offerings (ICOs), and other investment schemes involving digital tokens, in Singapore.

"Where sellers of digital tokens fail to highlight the risks, consumers should make the effort to find out more information about the underlying project, business or assets,'' they said.

A consumer, they warned, is exposed to heightened risk of fraud when investing in schemes that operate online or outside Singapore. As these operators do not have a presence in Singapore, it would be difficult to verify their authenticity. Should the scheme collapse, it would also be difficult to trace the scheme's operators. The recovery of invested monies may also be subject to foreign laws or regulations, which may not be the same as Singapore's.

"If consumers deal with entities that are not regulated by MAS, they forgo the protection afforded under laws administered by MAS,'' they said.

Other risks include the lack of credibility, illiquid secondary market, the lack of transparency, and potential misused for illegal activities like money laundering and terrorist financing.