Host: Yanina Petrovskaya
Guest: Malcolm Tan
We do not pretend the text version is perfect since it is just a transcription of the conversation. Neither does it constitute any sort of legal advice.
I’m a practicing lawyer from Singapore. I have my own one here in Singapore and we also run the ICO advisory and consulting company which called Gravitas International Associates. For Gravitas I have been in the business for about a year and we have about 40+ clients. Right now we have over 20 projects that we are working on. So we have about 15 or 20 projects that are ready for this successfully. In the advisory part of the business we do five verticals. We do the advisory advising strategy and etc. Second leg it is the structuring and legal, which country to register and incorporate the company, how to conduct the local issuance and other legal documentation that’s required for that leg of what we do. The business part which is the paper writing review, editing as well as the economics. The fourth element of what we do is marketing and PR, so for marketing and PR we do a lot. Social media can be created and running community management, digital marketing, investor relations, funding events and etc. And the fifth element of what we do is the minting of coins, creation of smart contract, security audit, penetration tests for the party audience and also even to the extent of building decentralized applications for all projects.
We help with exchange listings as well as liquidity provision in the marketing. So these are basically that ICO what we do. And I am also running my own projects. So the biggest project I’m working on right now is our own peripheral bank. So I just recently collected my residency in Estonia, we’re getting a fiat license in Estonia. Getting a new license for digital banking and we’ll be able to issue a loan. I have an account. It is already operational and has three crypto currencies, alongside 20 major currencies. One of our clients is licensed in Hong Kong, Australia and applying for Singapore life right now, we as a bank and one interesting feature of what we do is that we offer a deposit interest, so for hotness we don’t want to sell the whole thing that lets say Bitcoin it’s going to go up in price. We can allow them or they can decline in their wallet and then one year later we will return ten points, six the coin, we’ll give 6% deposit interest on major cryptocurrency storage. Other features of the crypto bank are pretty similar to what you would see in other products, but the difference in our ecosystem is that we also have one stable coin which many of our ICO partners and exchanges are already pledging to use, when it comes online stable coin is pegged to the euro. It’s based on assets that are in the bank and the audit. That’s one of the biggest assets that we have. Actually, we have another really big project coming up which is a coin for the International Romani Union. Many people might not have thought of it, but it’s actually the gypsy nation. The gypsies well recognized by the United Nations in the 1970s and they are trying to get social rights and recognition and so we are engaged to the ICO for these people.
Wow, that sounds really amazing. I’m just wondering how you manage all that on your plan, but that all sounds really great. I’m coming back to the questions that we actually wanted to discuss because they relate mostly to the legal system. Right now there are several jurisdictions offering quite a liberal approach to crypto in general and to blockchain projects and for a lot of people wanting to run the ICO or STO or their cryptocurrency exchange. They do not really understand the difference and they do not really understand which jurisdiction is best for which market or for which purposes. So we’re just trying to give them a brief overview of what the jurisdiction of the country is about. What would you be talking of project over? Which kind of markets could it be useful? I assume that doing the blockchain project in Singapore would it be good if you would like to enter Asian markets in general?
I do practice international law and we have planned to register the company everywhere in the world as well. For example, most of our clients register in Singapore. We do have a few in Malta and some ones in Germany, Hong Kong, Taiwan and etc. So every country is different in terms of the law and that’s so interesting about this ICO space and cryptocurrency space because every country has its own different sets of laws. So what I typically advise our clients is to consider Singapore as full utility token issuance and Malta or another country in the EU for a security token offering for the reasons of these two. Firstly, Singapore is very good as the international business center, but Singapore does not have its own regulations yet.
Singapore regulations for ICO are going to come up. For now no, the reason why many ICOs are launching in Singapore. Singapore is a well known place to do international business and secondly Singapore is a bridge between the East and the West. So our clients from Japan, China, Korea when they want to reach out to the west, they can set up outside of their countries, they would typically choose Singapore because it has a lot of Asian flavors as well. A lot of Japanese and Chinese people like to come to Singapore and it has quite a large talent pool and it’s very international and very easy to do business. It’s consistently ranked in the top three in the world efficiency, low corruption, it is easy by doing the competitiveness and there are western clients from the US, from Europe, when they want to access the cryptocurrency markets. To be honest, most of the cryptocurrency market are here. China, Korea, Japan are three big markets in the world. The US actually only represents about 4% of all the investment. Europe I think adds up to less than 5 %. So most of the money is found in Asia and that’s why a lot of the companies set up in Singapore and here there is an international center and everybody speaks English at the same time. You’ll be able to access the Chinese funds, the Hong Kong funds, family offices from Asia, who reside in Singapore and it’s easy to get to the eastern investors rather than going into countries like China, Korea, Japan, where the language is foreign. They can easily set up in Singapore and then reach out to the same pool of investors. So that’s a big reason why Singapore is very good. Even now for the token.
You could make a distinction between the token security defenses because in Singapore the law is not set up for security tokens yet. So the applicable law is the Securities Act, which makes it very difficult to set up such companies. For example, in Singapore if you want to get your license to sell securities, it will take you at least from 6 to 10 months to pass multiple examinations and you need to comply with high compliance standards. So the cost is very expensive to fulfill such requirements and that’s why it is easier to set up a security selling company in Europe, what we typically recommend. Until recently, Malta had a fast track jurisdiction for the security token offering. As your listeners might know Malta has passed the laws for ICO. Recently, in 2018 year and after that, it gave a three-month moratorium, where applications could be fast-tracked companies can start operating even before they receive a license. But unfortunately that fast-track path will be ending in three days time. November will be the last extension. There were already two extensions, so after the 12th of November companies will have to go through the whole process of applying and waiting for a license from the authorities before they can operate a security token offering. But what happened before 12th of November the companies that have already made that application, would be able to operate immediately. You don’t need to take your usual treatment for twelve months to get your license approved and to comply, if all the requirements under the Act, they can start operating the offering for security immediately. If we have a few clients who are setting up security offering exchanges in Malta and also business associates, we’re doing that and also multiple ICO, that we represent and cannot bring companies that we know and represent. Well, we look at that in Malta.
Okay. Just to sum it up if someone would like to enter the Asian markets, Singapore is good anyway. It’s an international financial center. Well-known for efficiency doing business conditions, it’s good for utility tokens and you wouldn’t get recommended it for security tokens because the laws are not there yet.
As far as I understand. No regulations or no recommendations from the regulator. Is it correct?
Yes, there is the guideline, but there is no clear law yet.
Okay. I see, it is sort of, let’s say a similar situation, if I might complain to Lichtenstein, where we are located and recommendations for ICO in general and for utility token. You just get some sort of action letter when you do it and for security tokens right now, you still have to apply the financial market laws right from the beginning of 2019 when the Blockchain Act will be enacted and it will become different then. So it’s similar anyway. How long does it take right now to get a utility token running on average? Could you describe the main steps at the average budgets, if you want to mention it?
Sure. So in a typical process would have three stages or rather four stages. That would be the preliminary stage, where you do the preparations. The second stage would be the pre-ICO private sale, then the open whiteness pre-sale and the fourth stage will be the actual ICO. This whole process can take anywhere from one month to six months, but that’s a process.
Some projects can even take nine months — twelve months, for example. It really depends on how much funds they want to raise before they go to the open market. For example, the clients who have all the marketing, have all the client base, will buy the tokens and all they need to do is to set up the infrastructure. So for that, we are able to do it very quickly within a month. It’s because the client would have the business proposal, although people are almost ready. That’s why really takes the most time for preliminaries. Plus, we’ll be able to do the technology element, pretty quickly smart contract creation and a meeting of the points typically take only about seven days. Security audits and packets of maximum technology tracking will take about a month. For marketing and PR that’s what really takes the most time in the ICO. So I’ll come back to this data for the business part of things, which is that by people writing economics. Typically we’ll be able to get the first draft out within the first seven to ten days, but after that it depends on whether the bank gets back to us quickly, because it takes two sides to agree in order to finalize. Typically we finish writing in three drafts. So that usually takes one to two months just to prepare and complete the white paper. But of course, if the plan comes with us, but if you just need to review it and make sure that it’s okay that cuts short the preparation time by a tremendous amount. Now setting up a website is pretty fast three to five days typically and then with a web site like paper we can start social media. Our own in-house staff who will set up the social media about the campaign that typically takes about two to three days for us to set it up and then we can run it and usually within seven days, we’ll be able to bring a lot of hunters from all over the world to join the program and to start becoming the users in the fan base and to create videos of forum posts and get the social media buzz around the project. Another element of what we need to do is the corporate structuring in legal.
One of the popular offerings that we have is the investor relations, because every project is done and I feel in another respect. Often the projects will not have CFO or fundraising, or they will wonder to engage us to do that for them. Investor relations that’s usually also a monthly contract, where we try to source for funds and to raise a private sale.
Another popular offering that we have, there are roadshows. So we typically also advise the clients to hit the major markets. For example, come to Singapore or Hong Kong to do a roadshow for the Chinese, do a show in Seoul, in Korea to reach other Korean investors and maybe, if we want to reach the Japanese investors, they should buy it in Tokyo one time as well. So usually our clients, who engage for road shows will go on and on in Singapore, Hong Kong, Seoul, maybe also Japan. So these are not typical offerings that we have a price.
Let me go through the whole range, price and advisory that’s rolling. Usually, three to six months and our fees will be $5 000 per month plus 0.5 % of that, will then sell, that if the client engages us as well. One shot then thousand by 5 %. Second that would take the ICO from start to finish. The second thing we should do is upper structuring and the legal corporation in Singapore. Let’s say that Malta or any other jurisdiction will be about $3 000-5 000. Well, the incorporation will be $6 000 per year for being a nominee direct, because most countries require you to have a local resident directory in order to set up. Then the second thing that we do for the district would be legal. So the legal for our prices would be $50 000 plus 1% . So if clients have their own lawyers or they have lawyers from other jurisdictions and the only one the legal opinion of us then is $1 000, then the thing that we do the business track. So it’s been $5 000 followed by pay. I think that’s roughly 5% of tokens and $25 000 for economics does it by five. If the client already has the white paper, we only review it and we just touch base on the hourly rate and the first thing which is marketing and PR. This can be anywhere from $50 500. It really depends on what the client wants to do. How much to spend and what that budget has. We charge $5 000 for the road show, for raising, for fundraising and capital building. We charge 10% of the funds raised on the success fee basis. If we are reading these investor relations from just $7 000 for the technical track, we charge $50 000 for the spot on. At the meeting of the clients, that’s 1% of the bookings and $50 000 if they need our token launch in order to conduct the ICO and post all these preliminary and the fundraising has been completed.
Then we will advise on exchange listing, exchange listings can be from $3 000 to maybe $300 000. We don’t really recommend very big exchanges to do that touch a very high amount of money and exchanges that we work with.
Oh well, that’s just great. That’s very detailed and also always as you know with the budgets because it’s working in New York. In general, lawyers sometimes note that. A detail that they cannot really open their pricing to everyone because, if read that the competitors would know. It’s just a very different approach. But I think also for the clients it’s better to know at the beginning how much it’s going to cost in total to just do to have an average price to you to understand how much it’s going to cost to run an ICO in Singapore. Thank you a lot for providing this detailed information.
Malcolm, I think that you have told already about the exchanges. Not good to go for the bigger ones because they’re going to charge you more and you work with, let’s say, not so famous ones, it can be used by the client and the costs are lower. Is that correct?
OK. That’s great. That’s really nice. I wanted to ask you about the banks. Do the banks in Singapore really cooperate with ICO and other crypto projects?
As you know it could be a report that you wouldn’t think so. Although the Central Bank has somewhat recently. The Managing Director of the Central Bank recently had to say that they will encourage the Singapore banks to open bank accounts. But the banks are not listening. So they can say anything. The Central Bank is saying one thing, but the banks think another. It’s still quite difficult to open bank accounts. But that’s something that we can help.
OK. I see. What’s the rationale. What is the reasoning behind the whole story like to do banks all consider equipped in blockchain and even if you do KYC properly do is still considered to be high risk and don’t one just touch on this topic?
Setting up bank accounts. Basically, the compliance cost is the most expensive thing for a bank. Because they know that if there’s crypto involved, it makes a small difficult look to do in order to track down the idea of the landfill. That’s a big reason why the bank would turn away. From their point of view, they don’t make much from a bank account for you, but they have a lot of compliance and they get fined by the recording.
Oh, that is, they weren’t already enough, so that they’re not even interested. Well, that sort of a similar situation to Swiss and Liechtenstein banks because a lot of people keep their assets there. But still, we see at least several banks in Liechtenstein and also several small, let’s say, small to medium banks in Switzerland, which really work with blockchain projects right now and they have different business models, some of them charge onboarding fee which is quite high. They charge a lower onboarding fee, but higher fees afterward. And in general blockchain projects, I would say because also of the compliance costs of the bank. The banks here charge higher fees than in general, on average I would say.
Yes, that’s the reason why they do it, because they know that do. If you really wanted you to pay for it. So that’s it.
So that’s not really easy to get a bank account. But I mean you know a few or several banks that are ready to look at blockchain project. Is that correct?
That’s another major reason why we are setting up our bank, because it’s something that we can use to help the whole ecosystem. So whether that’s ICO project that requires a bank.
Yes, absolutely. I think of the same things that are happening right now, also in Switzerland and Liechtenstein larger crypto projects are getting banking licenses right now to help the whole ecosystem, to help other projects to open their bank accounts easier. And then it works right now. I also would like to discuss in brief may be some cases of law. Fraudulent cases where there are cases of reverse ICO. I think that’s a practice which people do really need to know. So if you are ready to talk about some, maybe not really pleasant cases, but cases that show how people shouldn’t work when they do something in Singapore that would be great. Maybe some other cases were like that which got public. Or that’s, you know from the clients that something was done wrong and the regulator was not happy, or banks were not happy, or investors were not happy, and then they might have gone to court, some practical cases that you know from your practice, if you are allowed to talk about, that there were some cases the public right now in Singapore.
OK, Singapore is pretty good. There’s only been one case so far off where the regulators said that and ICO was not right and then immediately that I see it in the media. So that’s good. But only one case so far, that I know of. Last year, in July or August regulators opened reference to two projects and said that they were not regulated. So they let the buyer beware and then after they published a report, those two companies stopped ICO. So today they have their own, but they have changed it. I think around May or June this year, Singapore’s regulators made the announcement that they want it exchanges about their activities just based in Singapore. So there were no fines, there were no restrictions. But these exchanges had to step up their compliance and how they were doing the business and some cases of scams happen, as people lost money based on some fraudulent activities but this that wasn’t based on ICO. So nothing really major. There were advisories or about two known scams as well like this one that there was an open advisory about on that and that was one point, so one point is a Hungarian project and connect with the UK project and those projects were prosecuted in the US and the UK already. In Singapore, the regulators come out and say that it’s a scam. So it gave up. No real big cases that really exploded. There were unhappy investors because a lot of people had lost money through investments. But nothing that really when you went public.
Okay, I see. So I mean, if some really fraudulent cases happened and people complained to a regulator. Of course, the regulator is going to interfere, but in case people just lose their money and ICO because its high risk investment. Then most probably the regulator would not really interfere because it’s considered to be a high-risk investment.
I think we’ve pretty much-discussed everything what was on our agenda. Thank you a lot for your time for a detailed explanation as to how things working in Singapore.
Welcome. Nice to meet you.