Singapore: Security Token Offerings (STO)s: Re-Centralizing The Blockchain Dream In Singapore

Last Updated: 10 September 2019
Article by Xing Loong Lim

In our previous article, we explored the merits and pitfalls of a marriage between blockchain tokenization technology and traditional securities in the form of equity interests.

We concluded the article by suggesting that regulatory inhibitions (both domestic and cross-border) and a lack of coordination between the concerned stakeholders may present stumbling blocks for STOs seeking to gain widespread traction. This article will explore and highlight some developments which suggest that the STO market may finally be able to make some tangible headway in Singapore.

Re-forming the paradigm

Many early community-based blockchain projects propagated a vision of creating jurisdictionally autonomous virtual societies whereby independent stakeholders would contribute to the ecosystem in one way or another, and tokens would facilitate the sharing of power and trading of resources. This trope has become a persistent thread weaving through many blockchain projects promising to empower the masses and decentralize trade through the use of "utility tokens" launched through Initial Coin Offerings ("ICO"s).

However, with the "crypto winter", STOs have been rapidly gaining attention as a reassuring counterbalance to the "wild west" world of unregulated token offerings. In fact, STOs have been heralded as a possible solution to many of the chronic problems plaguing ICOs, such as unreliability, lack of oversight, and outright fraudulent activity.

Yet, the irony now lies in the suggestion that the continued survival of the digital token industry now seems to hinge on an offering structure which necessitates institutional centralization, jurisdictional fragmentation, and close regulatory supervision. STOs are, by nature, regulated product offerings. They inevitably attract the oversight of comprehensive regulatory frameworks imposed in the realm of traditional securities and capital markets. In doing so, this turns the original "blockchain communities" paradigm on its head and seems to drive the yet-unrealized dream firmly into the hands of securities regulators.

While this may not be a bad thing, it begets the question – what place does blockchain-based fund raising occupy in the world of securities and corporate finance? With the threat of draconian regulations posing as a stumbling block to the offering and trading of security tokens, enterprises may struggle to see any tangible benefit provided by STOs beyond those already present under traditional corporate financing structures. Therefore, it is useful address and assess the how the regulatory regime is evolving in light of the emergent STO market.

Changes to the Singapore regulatory regime

In May 2018, the Monetary Authority of Singapore ("MAS") issued two consultation papers aiming to address, among others, the go-to-market constraints of emerging business models offering centralised trading facilities that make use of blockchain technology. Market operators are currently regulated under two categories – the Approved Exchanges ("AEs"), for systemically-important market operators which require more stringent oversight, and the Recognised Market Operators ("RMOs"), for all other operators. In efforts to further meet the demands of evolving landscape, MAS has proposed to sub-divide the RMO framework into three further tiers. Significantly, the proposals call for the introduction of a third RMO tier, which is targeted at market operators that have a significantly smaller scale of business compared to more established operators under the current AE and RMO regime.

Accordingly, operators under this third RMO tier will be subject to less stringent requirements on capital, technology risk management and outsourcing, while being subject to a cap on the scale of their operations. In addition, operators will be able to submit to a self-certified compliance and risk assessment process so that they can launch their products more quickly in response to market demand.

A promising entrant to the scene

Following its push to encourage innovation and experimentation, MAS also launched a regulatory sandbox in November 2018, which promises to allow approved fintech services to operate within certain controlled parameters coupled with appropriate safeguards. As of 1 May 2019, a promising entrant has joined the sandbox in the form of ICHX Tech Pte Ltd ("ICHX") and its platform named iSTOX. ICHX intends to test commercial deployment for STOs and its active sandbox tenure under the MAS is set to be completed on 31 January 2020.

Notably, ICHX has received investments from both the Singapore Exchange (SGX) and Temasek subsidiary Heliconia Capital Management, with key executives from both SGX and MAS being appointed to the board of ICHX. According to their team, iSTOX aims to usher in "a new era for capital fund-raising through the use of security token offerings ... and add to the vibrancy of Singapore’s capital market ecosystem". The approval of ICHX as an entrant under the MAS regulatory sandbox framework means that it can officially commence activities as a market operator. It also means that iSTOX will likely be one of the first legally recognised STO platforms operating under the direct supervision of a government authority.

In line with the proposed amendments to the RMO regime, this development may be seen as an opportunity for MAS to directly identify operational risks, increase operational efficiency, and fine tune the regulatory framework for the benefit of the industry as a whole. The success of this sandbox experiment, and eventual rollout of a pragmatically tiered, risk-based, and market-efficient RMO regime may well catapult Singapore to the forefront of officially licensed and regulated STOs within the region.

The bumpy road ahead

Regardless of the fintech friendly stance of the MAS, it is still important to accept that many of the latent possibilities and benefits of securities tokenization have yet to be properly realized. Crucially, obtaining regulatory approval for trading within one jurisdiction means strictly just that. Hence, security tokens simply cannot be traded across geographical borders as freely as non-security tokens. In order to maximize leverage on blockchain technology to achieve omni-temporal trading and true liquidity in global markets, token trading needs to be trans-jurisdictional and address a broad investor base. However, such endeavours would inevitably attract an even number of offering restrictions, licensing and approval requirements, region-specific regulatory sluggishness and ambiguities, and fragmented compliance and monitoring standards.

Furthermore, geographically specific investor pre-screening and qualification requirements will likely serve to pare down the prospective trading pool to institutional or accredited investors (howsoever defined in each applicable jurisdiction). The above restraints, coupled highly probable restrictions on secondary offerings and resale of securities, also suggest that the true liquidity and widespread potential of STOs will continue to be systemically inhibited and face stunted adoption ceilings.

The catalyst for the game changer

Notwithstanding the limitations highlighted above, the launch of the MAS sandbox is a necessary first step towards positive regulation and creating a healthy, functional ecosystem for STOs to grow. Security tokens already promise a slew of game-changing benefits which may be immediately palpable for investors.

For instance, security tokens can readily open the doors to fractionalized investment with an unprecedented level of dis-intermediation. It can eliminate traditional barriers in relation to high-quantum investments by shaving off hefty charges such as brokerage commissions, portfolio management fees, and costs of financing. In turn, issuers can benefit from lower costs of project execution, and investors are able to achieve higher returns on their capital. Likewise, in Asian markets which are accustomed to investment through real-estate based ventures, tokenised property-backed tokens can inject a much-needed boon in the project financing and securitization space.

The explosive and innovative potential of security tokens are apparent, and there is good reason to believe that the true catalyst for realising the promise of STOs is having pragmatic, future thinking regulators who are willing to acknowledge and act on the emergent demands of an ever-changing landscape. In this regard, Singapore is poised to become a global leader in pro-actively regulating the STO space and taking the world one step closer to executing the next "fork" on the ever-expanding network of blockchain history – a centralized ecosystem for STOs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions