SINGAPORE: A new class of elites who are highly affluent and have the means to buy yachts or sports cars are emerging, but luxury retailers find them hard to reach.
That’s because these high-net-worth individuals have their money in cryptocurrencies rather than in banks.
Sensing an opportunity, Mr Julian Peh and Mr Olivier Burlot – the owners of luxury magazine publishing company Heart Media Group – came up with a mobile application called Aditus to help bridge these two groups.
“Crypto-affluents, as a class of consumers, they are quite privacy conscious,” said Mr Peh. “But this creates a problem in terms of marketing because luxury merchants need more data than usual to do outreach. What we do is we create a decentralised platform where luxury merchants can use smart contracts on the blockchain to reach out to crypto-affluents in complete privacy.”
They will fund their business through an Initial Coin Offering (ICO), which is a way for cryptocurrency ventures like Aditus to raise capital. It works like an Initial Public Offering (IPO) but instead of issuing shares, companies offer their own virtual coins, also known as tokens. These can be bought with virtual currencies such as Bitcoin.
The co-founders of Aditus plan to issue 450 million tokens next Thursday (Nov 30). Customers can use Aditus tokens to buy luxury goods through the app, while luxury retailers can offer them as rewards for customers.
The app will go live from Jan 4 next year.
Some companies, especially those that are newly set up, find it easier to raise funds through ICOs as they do not need to go through lengthy procedures such as preparing a prospectus and getting their accounts audited like in an IPO.
According to Coinschedule, which lists information and statistics about ICOs, there have been 228 ICOs so far this year. Collectively, they have raised US$3.6 billion (S$4.8 billion). This is a significant jump from the 46 ICOs in 2016, which raised slightly more than US$96 million.
The Association of Cryptocurrency Enterprises and Startups, Singapore (ACCESS) said 14 of its members have either completed or are currently going through an ICO now. And they have raised a total of about US$790 million over the past 11 months. That is about 20 per cent of the total funds raised globally so far this year.
ACCESS Chairman Anson Zeall said virtual coins issued by Singapore-based cryptocurrency businesses are now worth more than US$4 billion, which is about 2 per cent of the global market capitalisation for cryptocurrencies.
IMPORTANT TO NOTE OTHER LAWS BESIDES MAS GUIDELINES: LAWYER
Given the rising ICO activity, Singapore's central bank recently released detailed guidelines related to it. The Monetary Authority of Singapore (MAS) has stated that tokens which function like capital market products will be subjected to the same rules as IPOs, under the Securities and Futures Act.
But there are other laws in Singapore that companies should take note of even if they do not fall within MAS' regulatory ambit, said lawyer Ow Kim Kit.
“There is a general obligation under, for example, the Corruption, Drug Trafficking and Other Serious Crimes Act,” said Ms Ow, a partner at law firm Bird & Bird ATMD. “Under that particular Act, there are obligations generally to individuals to report certain suspicious transactions.”
But she added: “If we do see ICOs and cryptocurrency as being the new thing that will be with us for a very long time and will evolve and become something part of our lives, then I think that probably more specific regulations and laws would be ideal, not just for clarity but also for the fact that we want to operate in a safe environment.”
Mr Zeall agreed, saying regulations are needed to protect customers.
“We don't want to be just discussing (these issues) between ourselves,” he said. “It's important that MAS itself is involved in the process, as well as the banks.”
MAS is currently seeking public feedback on a new Payment Services Bill, which seeks to regulate activities involving electronic payments.