Plans to Regulate Activities in Non-fungible Tokens

Mr Don Wee asked the Prime Minister whether MAS has any plans to regulate activities in relation to non-fungible tokens.

Non-fungible tokens (NFTs) are a form of digital token, where each token has distinct and unique features that are verified and secured by blockchain technology. NFTs are still a relatively new development in the technology space. While NFTs can be used to represent any underlying asset, they have for, now, been mainly used to tokenise digital art and other collectibles.

MAS does not and cannot possibly regulate all things or products that people choose to invest their money in. We consider the substance of an asset when assessing whether a product or activity should come under MAS’ regulatory remit. MAS does not currently regulate NFTs, given the nature of their underlying assets, such as the few examples earlier. This is also the stance taken by most other leading jurisdictions.

More fundamentally, with regard to digital tokens, such as NFTs, MAS takes a tech-neutral stance and “looks through” to the underlying characteristics of the token to determine if it is to be regulated by MAS. Should an NFT have the characteristics of a capital markets product under the Securities and Futures Act (SFA), it will be subject to MAS’ regulatory requirements. For example, should an NFT be structured to represent rights to a portfolio of listed shares, it will, like other collective investment schemes, be subject to prospectus requirements, licensing and business conduct requirements1.

MAS would like to remind consumers that investments in digital tokens, including NFTs, are not suitable for retail investors. We have, on several occasions, put out advisories urging consumers to exercise extreme caution when investing in them. For NFTs, in particular, their perceived uniqueness, combined with speculative demand, has served to inflate prices. This, potentially, puts investors at risk of outsized losses should speculative fervour abate. Further, there are significant legal complexities and risks involved in NFTs. For example, a holder of an NFT with an underlying asset of a digital image should clarify his right of ownership and the legal framework that governs his rights.

MAS continues to monitor developments in the digital token space, including NFTs.