Singapore & Crypto
Singapore Crypto Friendly Score
Blockchain and cryptocurrencies have been the hottest trend for the better part of the last decade. Despite being just a 14-year old technology, blockchain is challenging the status quo in several fields, most notably fintech, data management, supply chain management, healthcare, etc.
On top of being a rapidly growing innovative technology, blockchain has also given birth to a new investment sector, i.e. crypto tokens and NFTs. Several countries worldwide, including the USA, India, and Singapore, have seen significant capital flow into this sector.
According to Triple A – a member of the Singapore Fintech Association – 9.40% of Singapore’s total population owns cryptocurrency. Moreover, about 75% of the citizens aged between 26 to 35 believe that cryptocurrencies and blockchain technology will soon be adopted on a large scale by individuals and businesses alike.
However, blockchain is still a nascent technology, and the majority of the population is only slightly familiar with it. Most people are unaware of the regulations and tax implications for crypto. Others do not even know where to buy and sell their digital assets.
That is why in this article, we will talk about everything a Singaporean citizen needs to know before getting started in crypto.
Singapore is putting efforts into making the crypto industry a more mainstream investment opportunity for its citizens. A recent announcement by the Monetary Authority of Singapore (MAS) has encouraged more institutional investors to enter the crypto space.
Moreover, with the launch Smart Nation Initiative, the Singapore government officially recognised the country’s blockchain and cryptocurrency companies as legally operating businesses.
As a result of the MAS’s new policy and Smart Nation Initiative, several crypto companies are expected to open their doors to the public. It is important to understand how institutional investors will treat cryptocurrencies in the future. As Singapore continues to make strides to institutionalise the crypto market, the crypto industry will soon have institutional investors flocking to the country.
Similarly, MAS’s has recently partnered with JP Morgan and other leading financial services firms. The goal is to explore the use-case of public blockchain for the development of trading platforms and liquidity pools for digital assets, which was another demonstration of the country’s positive attitude towards the wide-scale institutional acceptance of the industry.
A survey conducted by PWC concluded that 82% of the total participant enterprises and institutions in Singapore are considering adopting blockchain technology and cryptocurrencies in their business model. Moreover, 37% of them stated it to be their top priority.
To keep up with this growing institutional acceptance of crypto, Singapore’s top education providers, including NUS and SMU, are offering a number of courses, workshops, and degree programmes based on blockchain technology and its implication in different fields.
Exchange and Wallet Availability
Crypto exchanges and wallets are crucial components of the blockchain world. Exchanges act as a portal from the regular financial system to the cryptocurrency world, allowing users to buy and sell different crypto tokens and digital assets. While crypto wallets function more or less equivalent to our traditional banks, but for the decentralised economy.
The most important thing about using a crypto exchange/wallet is the process of choosing the right one. Both platforms directly deal with your money and assets. That’s why you must always go with exchange and wallet services that are reliable and enjoy a successful portfolio of providing a secure user experience.
Several hacking and online theft incidents in the past have resulted in users losing billions of dollars. The Bitfinex hack and Mt. Gox theft are probably two of the most infamous hacking incidents in which users were robbed of several hundred thousand Bitcoins.
Fortunately, as a result of increasing blockchain awareness and the continuous effort of the Singaporean government to minimize any risks for retail investors, citizens have several secure options for crypto exchanges.
Centralised Cryptocurrency Exchanges
Centralised exchanges are the most popular way to purchase any blockchain-based assets. As evident by the name, they are controlled and owned by a single entity. Each centralised exchange has to meet security law requirements.
These exchanges charge users fees for their services. Each centralised crypto exchange has its own fee structure and listed crypto token options.
Following are the top centralised exchanges currently offering services in Singapore:
Based in Singapore, Crypto.com is one of the world’s leading crypto trading platforms. Users can trade, invest, and stake up to 250 different cryptocurrencies. The platform works well for beginners and experienced users both.
Crypto.com charges a maker/taker fee of 0.4%. You can fund your account using multiple options, including credit/debit cards and bank transfers.
Capital.com is another Singapore-based crypto exchange that uses a number of advanced technologies, such as AI, to provide the best trading experience to its users. Probably the best thing about this platform is its zero-fee structure on all trades, deposits, and withdrawals.
You can trade up to 400 different crypto tokens. The payment methods include debit/credit cards, wire transfers, ApplePay, Giropay, and iDeal.
Unlike centralised trading platforms, decentralised exchanges (DEXs) are community-governed, i.e., no single central body controls them. All the important decisions and updates proceed after community voting.
DEXs are built on blockchains, which means they can benefit from blockchain’s low-cost transactions, robust speed, and the added layer of security.
On top of that, users have much more investment options than centralised exchanges. Even the biggest centralised trading sites, like Binance, are limited only to a few hundred tokens. On the other hand, popular DEXs, Uniswap and PancakeSwap, allow users to trade over several thousand crypto coins.
Cryptocurrency wallets are the most suitable option to keep your digital assets, especially if you plan to hold them for longer periods. When using the right crypto wallet, you need to consider several factors, like total holdings, type of assets, required security level, etc.
Web and online wallets are a better option for beginners who don’t own significantly large amounts of funds. They are mostly cheap. Both centralised (BitBuy and Binance) and decentralised wallets (Trust Wallet and MetaMask) crypto wallets are readily available to download as desktop software, mobile application, and chrome extension. However, you must note that these wallets are not entirely secure. Since they are constantly connected to the internet, they are vulnerable to hacks.
Hard wallets, or cold wallets, provide you with hard disk storage to keep cryptographic keys for your digital assets. These wallets are the most secure way to store cryptocurrencies and NFTs. As they are always disconnected from the internet, the chance for online hacks and breaches is equal to none. Trezor One, SafePal S1, Ledger Nano S, CoolWallet Pro, and SecuX W20 are among Singapore’s most popular hardware wallets.
You must note that in case you lose the device or get it damaged, you may lose your funds, and there is no way to recover them. However, some of the best hardware wallets offer back-up storage, so even if you lose the device, you may still be able to recover your funds if you still have your seed phrase.
At the end of 2021 – a year that has proven to be exceptional for crypto in terms of widespread adoption and market capitalization – Coincub put Singapore on the top of its list of top ten crypto-friendly countries. According to the global crypto ranking company, Singapore’s “robust economy, positive legislative environment, and high rate of cryptocurrency adoption” earned it the top spot in the list.
The government is working to regulate the domestic digital currency industry and has recently passed the Financial Services and Markets Bill 2022. The law covers firms based in the country and expands the MAS, which acts as a de facto central bank. It also covers virtual asset service providers, exchanges, and firms that provide financial advice on purchasing and selling digital currencies. It aims to ensure that cryptocurrencies are used responsibly and ethically.
Although Singapore has always been a leading cryptocurrency jurisdiction, it was the top dog only for a couple of months during the past four years. Before the new Payment Services Act (PSA) was passed and came into effect, Singapore treated cryptocurrencies as digital assets and commodities.
Consequently, many cryptocurrency projects are located here. However, since the Payment Services Act has come into effect in January 2020, Singapore’s regulators have tightened their regulatory requirements. This will likely increase the costs associated with compliance.
The new law is a step in the right direction for Singapore’s crypto industry. While it is not the final answer to the global crypto scene, the government is taking a pragmatic approach to the crypto industry development in the country. It recognises the potential for economic growth and wants to create a conducive regulatory environment for its adoption. It also wants to identify the risks and manage them proportionally. In other words, while Singapore is leading in the area of cryptocurrency regulations, it does not want to be the only country to join in.
The Government of Singapore has established a comprehensive set of cryptocurrency regulations. These regulations cover various aspects of cryptocurrency, from how to buy and sell them to taxation and AML/CFT. Singapore is also a “crypto-haven” because it regulates the sector while still taking a balanced approach to its laws and policies. A number of pieces of legislation are already aimed at legalising Bitcoin and other cryptocurrencies.
Singapore’s Inland Revenue Authority classifies cryptocurrencies as Digital Payment Tokens. While long-term investments in cryptocurrencies do not incur capital gains, profits derived from the trading of virtual assets are taxed.
However, profits from trading in these virtual assets are tax-exempt if they are generated through normal business activities. For example, if you are providing goods or services to other parties, you will pay taxes on the value of the goods or services that you have provided. These transactions are also considered barter transactions.
The Monetary Authority of Singapore (MAS) is exploring DeFi protocols and other technologies as part of a larger project to study the economic potential of cryptocurrency and open networks.
As part of the pilot initiative, JP Morgan, DBS Bank, and Marketnode will explore the wholesale market with a permission liquidity pool of tokenised bonds. The project aims to test the feasibility of asset tokenisation, decentralised finance, and institutional-grade DeFi protocols using open, interoperable networks.
MAS previously warned of the risks of cryptocurrencies and discouraged retail investors from acquiring them. In order to reduce risks, Singapore is working with JP Morgan Chase to develop guidelines that will help institutions and consumers understand DeFi and other crypto-based technologies.
MAS is also testing DeFi protocols. The new pilot is based on a public blockchain, enabling it to be interoperable across networks and increasing the country’s competitiveness as a global financial centre. In the future, the MAS will leverage the pilot’s results to shape its policymaking. This is an exciting development in financial regulation. It could help make Singapore a global financial centre. But first, the government must get the right policy for DeFi.
As a matter of fact, DeFi is a better system for businesses, enabling them to borrow money without undergoing numerous checks and requirements. Unlike bank savings accounts, DeFi’s system is decentralised, which means that it is harder for banks to make decisions based on these checks. Furthermore, DeFi eliminates the need to provide proof of the quality of corporate performance. There are many benefits to this method of finance, but it is not for everyone.
DeFi uses Artificial Intelligence to process core financial logic. It collects market data and forms high-liquid financial services and capital markets. Using the DeFi system, the financial interest rate does not depend on a central bank or authoritative financial institution; it reflects the actual market demand and supply. The system also allows for the creation of a transparent credit market. This enables financial institutions to create more efficient and transparent credit markets. Its ultimate goal. therefore, is to bring financial innovation to Singapore.
DeFi is the financial extension of the blockchain, with the crypto tokens acting as the underlying currency. While the current system is based on mortgage lending, the technology is not limited to this alone. The blockchain technology that underpins DeFi has many practical applications. The blockchain is a valuable technology that can enable companies to earn interest on deposits, as well as fees collected for a service. DeFi acceptance in Singapore is one of these practical applications.
The Smart Nation Initiative from the government of Singapore is taking steps to formalise cryptocurrency exchanges. The government wants more oversight over such transactions, as unregulated exchanges would render them “underground,” making it difficult to trace and report them. The MAS has so far rejected two applications and withdrawn another 30. This is because of the applicants’ failure to meet its money-laundering standards. But the move is welcomed by many investors.
As for the regulatory framework for businesses, the MAS is looking to stay abreast of the cryptocurrency industry globally. This means a robust AML/CFT regime for crypto service providers and more stringent technology risk management requirements for financial institutions.
The introduction of such regulations in Singapore follows the migration of many high-profile Chinese crypto firms following the crackdown in China. In addition, Singapore is also seeking to make its regulations more aligned with the rest of the world, as it has been leading the way in this field.
In addition to establishing a regulatory framework for cryptocurrency services, Singapore has also made it easier to regulate them. The MAS has issued new guidelines on trading digital payment tokens, commonly referred to as cryptocurrencies. These guidelines discourage service providers from marketing their services to the public and trivialising the risks associated with DPT trading in Singapore. The new guidelines will take effect immediately.
However, the broader market for crypto services is still unclear. While the government is trying to create a regulatory framework for cryptocurrency services, the central bank is not in a rush to create a CBDC. While this concept of a digital version of cash may make sense in other countries, it is not so attractive in Singapore. It is still an experimental technology, but its benefits are expected to be substantial. If successful, it could become the future of banking.
The PSA also sets up two types of licenses for cryptocurrency service providers. A significant payment institution license requires a cryptocurrency service provider to offer at least 50 individuals within 12 months. A private placement requires that the total amount raised must not exceed $5 million. In addition, the PSA requires that any cryptocurrency service provider in Singapore acquire a capital markets services license. This license is necessary for trading in cryptocurrencies.
The MAS requires every crypto service provider to conduct a proper risk assessment. They must develop a formal approach to identify money laundering and terrorist financing risks and evaluate the liquidity of cryptocurrencies.
The MAS also expects crypto service providers to take into account the characteristics of these products that promote anonymity and liquidity. In addition to risk assessment, crypto service providers should also consider the volatility of these assets, which characterises any regulated financial service.
A new financial service called ADDX will accept crypto assets in the category of net personal assets. This service will offer a 10% discount on Bitcoin, Ethereum, and USDC.
Blockchain transparency in Singapore can help the country identify potential problems faster. With the help of blockchain technology, businesses can use data from the blockchain to create a custom solution for their business challenges. Most notably, the use of blockchain for businesses will allow companies to save money and time on maintenance and repair, as well as identify and prevent counterfeit products. In fact, blockchain solutions for education in Singapore are already being tested and implemented in schools.
As a major Asian financial hub, Singapore is working on a blockchain-based system that will make transactions more transparent. Other countries, including the Philippines, are also exploring the use of this technology. In the Philippines alone, the remittance industry is worth billions of dollars every month, and blockchain services could make these transactions more affordable. By removing middlemen and increasing the transparency of financial transactions, blockchain technology can transform many industries, including remittance.
The food industry is another sector that could benefit from blockchain technology. For example, the food industry has suffered countless outbreaks of dangerous bacteria and other materials that were accidentally introduced to foods. Until now, it has taken companies weeks to trace the source of these problems. With blockchain technology, brands can trace the origin of their products, from their manufacturing sites to each stop along the way, all the way to delivery. The benefits are numerous.
If you’re thinking of spending Crypto in Singapore, there are a few things to consider. The following are some of the best places to spend your digital currency.
Coinrepublic used to be one of the most popular third-party brokers in Singapore but was recently bought by a Mexican company.
A RoboCoin ATM is one option for residents, converting cash into Bitcoin or SGD and reflecting the current exchange rate. Unfortunately, the Monetary Authority of Singapore issued guidelines on January 17, 2022 that forbid cryptocurrency companies to advertise their services to the public. As a result, you will no longer see physical bitcoin ATMs in Singapore.
The MAS has repeatedly issued consumer advisories about the risks associated with purchasing and spending cryptocurrency in Singapore. Although cryptocurrency prices in Singapore are still quite low, they can fluctuate drastically and are considered to be highly speculative. Furthermore, the government of Singapore has not yet issued any regulations related to minting or spending cryptocurrency. Even if it becomes legal, there is still some uncertainty surrounding its regulation.
Banks’ Activity in Crypto
As the value of crypto grows in popularity, more banks are deciding to offer crypto services. In Singapore, the DBS Vickers brokerage arm received approval in principle to offer digital currency services to companies and asset managers. The move is in line with the country’s Payment Services Act (PSA), passed in 2019. The act allows financial institutions to license digital payment service providers, such as DBS Vickers and offers cryptocurrency trading and management to its clients.
While this activity does not yet generate significant revenues for the banks, it can help diversify their income. Moreover, banks can create competitive advantages in emerging financial services fields, engage in new customer segments, and protect their market positions against crypto-focused technologies and entities. For instance, in Singapore, the Monetary Authority has launched a pilot program to explore how banks can use cryptocurrency. The project, known as Project Guardian, involves several banks, including DBS and JPMorgan.
DBS Group Holdings is the largest bank in Southeast Asia. It has launched a cryptocurrency exchange called DBS Digital Exchange. It will provide trading, custody, and tokenisation services for cryptocurrencies. The digital exchange will be powered by blockchain technology and will also be used for secondary trading and fundraising. Tokenisation is a process that converts rights in an underlying asset class into a unique digital form that is eligible for trading.
The development rate and expansion in the blockchain and crypto industry are rapid. Soon, we will see the obvious implications of these technologies in different fields. Corporate giants like Microsoft, Intel, Alibaba, and Walmart, have already incorporated blockchain technology into their business models. Considering it all, we can comfortably say that blockchains will be a big part of our immediate future.
To keep up with the fast pace of this ever-evolving sector, the Singapore government must formulate a proper regulatory framework that will empower development in the industry and reduce risks for consumers.
Our extensive analysis of the Singaporean Crypto market doesn’t stop here. You can read about our list of Crypto Guides for Singaporeans for additional information.
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