Hi, This is Qadir A.K, Crypto lover and Research Columnist.
Someone said it right, ‘Every new experience brings its own maturity and greater clarity of vision’.
Every chapter of my writing series has enriched me with new experience and greater vision. Continuing to do so, this is my 8th chapter in my series, ‘The Cryptocurrency Breakthrough 2020 – Synopsis 8’
Cryptocurrency Regulations in Singapore
Singapore is presently Asia’s cryptocurrency and blockchain hub with its welcoming attitude towards emerging technologies. Right from 2016, the government expressed its willingness to implement the distributed ledger technology in financial services. Singapore is the first country which started regulating the usage of cryptocurrencies in 2014 when most of the world was still immature about it.
The success of ‘Token Day’, in Singapore, which was held on Oct 31st, 2018, is a clear example of the positive approach of the government with cryptos. The token day was organized by Bizkey, a blockchain platform in HongKong to celebrate 10 successful years of cryptocurrencies in Singapore.
It was a 19-day campaign, where-in 30 retailers clustered to accept various cryptocurrencies as payments. The public also used Bizkey’s intelligent blockchain Point-of-Sale(POS) device for payments including cryptos like Ethereum, Binance coin, Aelf coin, and Zilliqa coin.
Government Approach towards Cryptocurrency and Blockchain
The Monetary Authority of Singapore(MAS) has been studying cryptocurrency developments closely for years. A high ranking government official also stated about the absence of a strong case to ban them. In this scenario, where the surrounding countries are regulating crypto, it has increased pressure on the authorities in the country to clarify their stand on cryptos.
Deputy Prime Minister of Singapore, Tharman Shanmugaratnam, according to a report told that the financial authorities would not distinguish between fiat currencies and cryptocurrencies. And also clarified that the Central Bank would be imposing the existing legal requirements on crypto activities.
The Deputy Prime-Minister noted that the use of cryptocurrency for payments in Singapore is limited and trading volumes are much smaller than countries like Japan and South Korea. He stated,
“For now, the nature and scale of cryptocurrency trading in Singapore does not pose risks to the safety and integrity of our financial system. We will continue to encourage experiments in the blockchain space that may involve the use of cryptocurrencies. Some of these innovations could turn out to be economically or socially useful. But equally, we will stay alert to new risks.”
Cryptocurrency and Singapore
The cryptocurrency has a friendly market here in Singapore as they are legal!! The Monetary Authority of Singapore(MAS) has a relatively soft approach on the exchanges too but releases warnings to the public on the risks frequently. The major task of MAS is to ensure the cryptocurrencies are not engaged in money laundering, terror financing or any other financial crimes.
MAS CEO Ravi Menon said that cryptocurrencies are not required to be regulated at present nor the cryptocurrency business. He stated that,
“We’ve taken the approach that the currency itself does not pose the risk that warrants regulation. In fact, cryptocurrencies are often abused for illicit financing purposes, so we do want to have AML/CFT controls in place. So those requirements apply to the activity around cryptocurrency, rather than the cryptocurrency itself.”
MAS announced on Aug 01, 2017, that ICO’s and Exchanges will be regulated under them.
The ICO’s which fall under Securities need to register with MAS and may be subjected to authorization and recognition requirements if the Collective Investments scheme is applied on the offering.
However, some offers with below-mentioned conditions can be exempted from the authorization and recognition,
- It is a small or personal offer not exceeding $5 million within the 12-month period.
- Private placement with not more than 50 employees within 12 months
Futures Act Recently the Singapore Parliament has passed the Payment Service Act(PSA) to regulate the purchase and sale of virtual currencies which is still not in action now.
In case of exchanges, the main requirement to get a licence is that it must provide security for their user’s funds, prevent money laundering and financing of terrorism, keep track of transactions and report any suspicious activities. While there is no KYC norm as of now, exchanges are advised to request identification from their customers.
Many cryptocurrency companies have set up their base in Singapore because of the clarity in regulation in the country.
Taxation and Mining
Inland Revenue Authority of Singapore (IRAS) is the authority that takes care of the taxations in Singapore. Taxation on cryptocurrencies is done in two different scenarios, one when the cryptocurrencies are used as the mode of payment and the other when the cryptocurrencies are used in trading.
Cryptocurrencies as Mode of Payment
The businesses that chose to accept payment in the form of cryptocurrencies are subjected to the normal income tax Act of the country. Taxes would be based on the net profit which is 17% of the taxable income.
The business that accepts crypto in the form of payments is required to record the sale based on the open market value of goods or services in Singapore Dollars.
Cryptocurrencies used for Trading
The businesses or exchanges who deal in buying, selling and mining of cryptocurrencies are taxed based on the profits derived from the trading.
On the other hand, businesses that buy cryptocurrencies for long-term investment purposes may enjoy a capital gain from the disposal of these currencies. However, there is no capital gains tax in Singapore and hence no Capital Gain Tax will be charged on the gains.
At present, there are no specific regulations for the mining of cryptocurrency in Singapore as long as a miner uses his own hardware resources and electricity. A miner is also subjected to taxations too. The cryptos earned after successful mining will be taxed 17% on the net profits.
IRAS states on its website that, “ Profits derived by a business which mine and trade virtual currencies in exchange for money are also subjected to tax.”
Laws Implemented to regulate Cryptocurrencies
Recently on January 28, 2020, The Monetary Authority of Singapore’s proposed Payment Service Act (PSA) came into effect which bought all crypto business and exchanges based in Singapore under current Anti-Money Laundering (AML) and counter-terrorist- financing (CTF) rules.
According to this law, the cryptocurrency firms need to register with MAS within a month showcasing their local presence. Once registered, they have a six-month grace period to apply for a Licence. Singapore’s monetary authority will issue three types of licence depending on the risks and scale of services.
- Money-Changing License
- Standard Payment Institutions
- Major payment institutions
“The Payment Services Act provides a forward-looking and flexible regulatory framework for the payments industry,” MAS Assistant Managing Director Loo Siew Yee said in a statement. “The activity-based and risk-focused regulatory structure allows rules to be applied proportionately and to be robust to changing business models. The PS Act will facilitate growth and innovation while mitigating risk and fostering confidence in our payments landscape.”
On the other hand, when all the other countries are still working on the recommendations given by the Financial Action Task Force (FATF), Singapore is a step ahead by working on it and are ready for implementation at present.
Series of Events
16-04-2020:- Blockchain Association Singapore (BAS) announced its official launch which will be responsible to support existing and new blockchain companies in the state. The newly formed association is a merger of Singapore Blockchain Association (SBA) and Blockchain, Enterprise and Scalable Technology (BEST).
28-01-2020: Singapore’s PSA-Payment Service Act can into effect which bought the cryptocurrency and the blockchain under the regulations according to an announcement.
08-10-2018:-The monetary authority of Singapore released licencing guidelines for individuals providing ‘digital advisory services which are nothing but advice on investment products.
23-04-2018:-The co-founder of NUO, Varun Deshpande announced the opening of the world’s first Cryptocurrency Bank. Advanced Robotic Account Managers(AARAM) are installed to deal with the customers. ATM’s will also be provided where-in one can withdraw and deposit cryptocurrencies.
06-04-2018:-Singapore’s Minister of Finance, Hen Swee Keat, said in his speech during the 22nd ASEAN Finance Ministers meeting that Singapore would continue to support innovations in the FinTech industry and acknowledged the fact that the Digital Ledger Technology can provide great potential for the country.
21-11-2017:-The MonetaryAuthorityof Singapore (MAS) proposed a bill to bring the purchase and sale of cryptocurrencies under the umbrella of regulations known as ‘Payment Service Act’.
03-10-2017:-Deputy Prime Minister of Singapore Shanmugaratnam responded in the parliament regarding regulations on Cryptocurrencies and ICO’s that MAS will regulate cryptocurrency activities and the updated legislation will be introduced expanding and streamlining the scope of existing laws.
01-08-2017:-The Monetary Authority announced its plans to regulate ICO’s.
16-11-2016:-The Monetary Authority announced the development of a blockchain pilot project that will facilitate inter-bank payments, globally. The project aims to develop a payment system that will enable banks to transact between global markets at any time with instant transfer of funds.
29-08-2016:-The central bank of Singapore has proposed a new regulatory framework for payments which would bring digital currency exchanges under surveillance. The framework requires companies to obtain a licence from MAS. It has divided payment activities into three categories.
13-03-2016:-The Monetary Authority of Singapore planned imposing a KYC process and reporting of suspicious transactions in order to regulate virtual currencies in order to address money laundering and terror financing activities.
09-01-2014:-Inland Revenue Authority of Singapore (IRAS) responds about the taxation of cryptocurrencies. According to them, companies will be taxed based on virtual currency sales.
22-09-2013:-The Monetary Authority of Singapore issues warnings to the general public regarding the risks involved in trading with cryptocurrencies.
Singapore Asia’s crypto and blockchain hub has provided them with a very friendly environment to operate. However, they have regulated and bought laws to deal with illegal activities. At present crypto market is very well supported here and it is very exciting to witness the future advancements of cryptocurrencies and also the various implications of blockchain technology.