On January 17, the Monetary Authority of Singapore (the “MAS”) published guidelines giving effect to its expectations that digital payment token (“DPT”) service providers should not promote their DPT services to the general public in Singapore (the “Advertising Guidelines”).1 In this article, we provide a brief overview of the Advertising Guidelines and share our initial questions and views.

OVERVIEW OF THE ADVERTISING GUIDELINES

• The Advertising Guidelines set out that DPT service providers should not engage in marketing or advertising of DPT services:
   in public areas in Singapore such as through advertisements on public transport, public transport venues, public websites, social media platforms, broadcast and print media, or provision of physical ATMs; or
• through the engagement of third parties, such as social media influencers, to promote DPT services to the general public in Singapore.2

DPT service providers can only market or advertise on their corporate websites, mobile applications or official social media accounts. In such advertising, DPT service providers must not trivialize the risks of trading in DPTs in a manner that is inconsistent with or contradicts the risk disclosures under the Payment Services Act of 2019 (the “PS Act”).3 The Advertising Guidelines also addressed the promotion of payment token derivatives and engaging third parties and social media influencers to promote their services to the general public in Singapore.

Why were the Advertising Guidelines issued?

The MAS has consistently stated that trading in DPTs is highly risky and not suitable for the general public in Singapore, as the prices of DPTs are subject to sharp speculative swings. The title of the announcement (the “Announcement”) about the Advertising Guidelines is “MAS Issues Guidelines to Discourage Cryptocurrency Trading by General Public”. The MAS issued the Advertising Guidelines despite customers not being offered any statutory protection for trading DPTs other than the risk disclosures set out in MAS Notice PSN08 on Disclosures and Communications.4

Why now?

We do not know what drove the timing of the publication of the Advertising Guidelines. In the Announcement, the MAS observed “… some DPT service providers have been actively promoting their services through online and physical advertisements or through the provision of physical automated teller machines (ATM) in public areas. This could encourage consumers to trade DPTs on impulse, without fully understanding the attendant risks”.5
We note that the Advertising Guidelines were published on the same day that Spain’s National Securities Market Commission released a circular on advertising cryptocurrency investments, with the UK also recently conducting a review of cryptocurrency advertising.

THOUGHTS

We believe:

• DPT service providers:
  
  • should consider what updates they need to provide the MAS as a result of implementing the Advertising Guidelines. If an applicant’s revenue or profitability projections are materially and adversely affected due to the applicant’s inability to advertise to the general public or offer cryptocurrency ATM services (or for any other reason), we would generally recommend proactively updating the MAS.
  • should evaluate whether they generally conduct themselves with the understanding that trading of DPTs is not suitable for the general public. While this is not the emphasis of the Advertising Guidelines, we think it is one of the most important statements that Boards of Directors of DPT service providers should consider. For example, we anticipate that DPT service providers may be expected to perform suitability analyses similar to those required for financial institutions selling “specified investment products”.7 We also refer to the MAS statement that the financial services industry must go beyond doing what is permitted legally, to doing what is right and ethical”.
  • have questions about
    • what marketing to the general public is permitted under the Advertising Guidelines, such as corporate branding exercises that do not refer to DPT services offered;
    • what measures (such as disclaimers) are expected to be taken with respect to internet advertising directed to customers outside Singapore to ensure compliance with the Advertising Guidelines;
    • whether services that will be regulated once the amendments to the PS Act go into effect are subject to the Advertising Guidelines prior to the effectiveness of such amendments; and
    • what marketing may be considered as trivializing the risks of trading in DPTs. For example, would a GIF of a roller coaster highlighting the volatility of crypto markets (something we have seen) be considered trivializing the risks of cryptocurrencies?

CONCLUSION

The Advertising Guidelines are only a week old and are being digested by the DPT service provider industry and their regulatory advisors. The Singapore Fintech Association and Blockchain Association of Singapore are also conducting industry consultations which may affect how the Advertising Guidelines are implemented. The consultations may result in material developments with respect to how the Advertising Guidelines are implemented in practice. Still, the Advertising Guidelines are in effect today and already affect how DPT service providers operate.12
Regardless of what you think about the Advertising Guidelines, we think there is a silver lining. It is a great reason to grab a coffee with the team at Holland & Marie!