NFTs not suitable for retail investors, consumers should exercise 'extreme caution': Tharman

SINGAPORE: Investments in digital tokens, including non-fungible tokens (NFTs), are not suitable for retail investors, said Senior Minister Tharman Shanmugaratnam on Tuesday (Feb 15).

He also noted that MAS has already put out several advisories urging consumers to exercise "extreme caution" when investing in such tokens. 

"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," said Mr Tharman, who is chairman of the MAS. 

Mr Tharman was responding in a written reply to a parliamentary question by Member of Parliament Don Wee (PAP-Chua Chu Kang), who asked if MAS had plans to regulate NFT-related activities. 

NFTs are digital tokens with a unique digital signature, verified and secured by blockchain technology. Though they typically take the form of art, music, videos and other collectibles, they can be used to represent any underlying asset. 

"MAS does not and cannot possibly regulate all things or products that people choose to invest their money in," said the Senior Minister, adding that MAS considers "the substance of an asset" when assessing whether a product or activity should come under its regulatory remit.

MAS does not currently regulate NFTs given the nature of their underlying assets, he added, noting other regions have also taken such a stance. 

Mr Tharman said MAS takes a "tech-neutral" stance and looks at the underlying characteristics of the token to determine if it should be regulated.

"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," said Mr Tharman.

"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 requirements," he said.

Mr Tharman also outlined "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," said Mr Tharman. 

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