3 types of cryptocurrencies and how they are regulated in Singapore – Wired PR Lifestyle Story

For most people, the first introduction to blockchain technology is through cryptocurrencies.

Today, blue-chip coins like Bitcoin and Ethereum have become household names. Fiat has been created as a digital counter to money and is being used for the same purposes: to store value, to facilitate transactions and to measure value.

That’s not all that cryptographic assets can use. In recent years, new forms of tokens have emerged in the blockchain, each with its own unique purpose.

In general, cryptographic assets can be classified into three main categories. These include:

1. CryptocurrencyY

Cryptocurrency refers to the standard currency that is linked to any given blockchain. For example, ether (ETH) is the original cryptocurrency used in the Ethereum blockchain. When a user makes transactions on Ethereum, the resulting fees must be paid at home.

A cryptocurrency has no utility beyond fiat money. It is attracted by being decentralized, and as a result, it is relatively anonymous. Users can trade in cryptocurrencies without the active monitoring of their transactions by external authorities.

2. Availability token

Utility tokens are used by applications in an existing blockchain. Their main purpose is to provide access to a product or service. They may play different roles depending on the nature of the parental application.

Games like Axie Infinity and Gods Unchained (hosted on Ethereum) have their own utility tokens. These tokens give voters the right to vote in their respective gaming ecosystems. They can also be used to purchase in-game items.

Although gambling has long been a virtual currency, the difference here is that tokens can also be exchanged for real money.

Ethereum also includes financial and technology applications that use their own utility tokens. For example, Uniswap is an application designed to facilitate the exchange of different tokens hosted on Ethereum. Users with Uniswap’s UNI token can submit and vote on application development proposals.

3. Security token

Security tokens represent an investment in an underlying asset. They are the digital equivalent of products, such as stocks, bonds, and mutual funds.

While availability tokens can they will be used to provide voting rights and profit-sharing to holders, not to give them ownership of the issuing company. On the other hand, security tokens are designed for this purpose.

The first security token was launched by VC called Blockchain Capital. The company raised $ 10 million through its security token BCAP, which was issued at a rate of $ 1 per token.

These funds were used to invest in the blockchain industry. Blockchain Capital currently holds shares in companies such as Coinbase and Opensea. It also has cryptocurrencies including Bitcoin and Ethereum.

The BCAP token is now worth more than $ 16. Dividends are paid to BCAP holders just like shareholders in a regular public company.

How are these different cryptocurrencies regulated in Singapore?

As they serve special purposes, different categories of cryptocurrencies need to be monitored in accordance with appropriate regulations.

Cryptocurrencies and usability tokens remain largely unregulated because they are not recognized as legal income. However, the Singapore Monetary Authority (MAS) often issues warnings to people about the risks of treating these assets as investment products.

Exchanges that facilitate the purchase and sale of these assets should only comply with anti-money laundering (AML) and anti-terrorist financing (CTF) regulations. These are set out in the 2019 Payment Services Act collecting customer data and proper KYC checks by account holders.

Security tokens, on the other hand, are also regulated by the Securities and Futures Act (SFA). Since these tokens were created to be investment products, they are adhering to the same standards like traditional capital market offerings.

Any company or exchange that intends to offer security tokens in Singapore must obtain a license according to the SFA. They should also issue a brochure with the offer of security tokens to inform potential investors about the benefits and risks.

Will Singapore introduce more cryptographic regulations?

As the crypto space is constantly evolving, the need for more regulation may be unavoidable. As mentioned earlier, companies can now issue securities in the form of utility tokens.

This would allow it to exceed the standards set in the SFA. Such gaps arise because the nature of cryptographic assets is still light and evolving. Therefore, clearer boundaries will appear in a timely manner.

Featured Image Credit: Coinbase