How has Singapore opened doors for crypto payments?
Singapore, with its objective to become the global hub for cryptocurrency, opens up its market allowing customers to make crypto payments at various retail stores. While cryptocurrencies might be labeled as highly risky, at the same time, they promise a better future for the economy of the country and "has the potential to transform the future of finance," in the words of Deputy Prime Minister Heng Swee Keat. He also added that the authorities must regulate the risks and threats posed by blockchain technology and payments. However, those rules should not limit the functions of cryptocurrencies and should provide a conducive environment for them to revolutionize the economy.
Research studies demonstrate that 90% of Singaporeans know about cryptocurrency, especially Bitcoin, and 40% of them possess the ownership of digital assets. 57% of this sample population in the research had a preferable cryptocurrency and a chosen mode of payment under blockchain payment. And 45% opted for Bitcoin over others. Interestingly, Bitcoin is perceived as an investment by the majority of the citizens. One-fourth of the population considers Bitcoin to function as money, i.e., as a store of value. And only 12% of the citizens consider it as money in all its aspects.
The Monetary Authority of Singapore
The Monetary Authority of Singapore or the MAS is the central bank of the country, regulating its finances as the sole regulator of the Republic of Singapore. The organization is focused on the bigger picture, including cryptocurrencies as one of the aspects. This greater vision embodies the entire crypto ecosystem. Now, this consists of the blockchain technology functioning as a ledger consisting of all the records of crypto transactions. These transactions are irreversible. The second component of the ecosystem is what is called tokenization. This ensures that all digital assets are represented on the blockchain. Finally, the third feature is cryptography. This can be defined as the way to perform transactions involving cryptocurrencies. The MAS realizes the potential of this technological innovation and the transformation it can bring about.
To facilitate the innovative technology, the Monetary Authority of Singapore has clarified its subgoals:
- To expand the capabilities of digital assets.
For this, the MAS has clarified the treatment of taxes and is promoting talent development in the field. Moreover, the bank is also providing grants to those individuals and groups contributing to this digital growth. They aim to work along with experts in order to conduct practical experiments exploring the potential of cryptocurrencies and blockchain technology in real life.
2. To manage the risks associated with crypto transactions.
Every coin has two sides. Cryptocurrencies do not come without risks. Thus, to reduce threats posed by blockchain technology and to manage the associated risks, MAS is effectively controlling the digital assets as well as the activities of the service providers. Two already established acts take care of the risks like cyber risks, threats to consumers, fraudulent activities in the crypto payment processor or via crypto payments made on a one-to-one basis, and money laundering, among other threats. If the cryptocurrency is used as a security, then the transaction is watched over by the Securities and Futures Act. If, however, the asset represents a medium of payment, then the cryptocurrency in the case is controlled by the Payment Services Act.
Crypto Tax treatment
Tax treatment majorly impacts the use of cryptocurrencies by the citizens. The Inland Revenue Authority mentioned that since there are no taxes on the capital gains, capital gains gained in the process of selling digital assets will not be taxable either. However, when cryptocurrencies represent utility tokens, the issuers of the tokens will be taxed. Businesses and individuals are taxed normally when crypto payments are accepted.
Current Situation - Crypto in Vogue
Singapore is witnessing many businesses run by individuals or groups accepting crypto payments as a legitimate mode of payment apart from fiat and online transfers. In fact, a homeware retailer known included as & glazed cryptocurrency as an option for payment before including other typical cashless alternatives. Although crypto payments make up an insignificant component of the total payments, businesses remain hopeful as they see the growth of cryptocurrency ownership leading to increased scope of business expansion. Charles & Keith, for instance, offered cryptocurrencies as an acceptable mode of payment and integrated the option on its e-commerce site itself. As a result, three-forth of the crypto payments were made via the crypto payment processor integrated with the business website.
Some businesses are benefitting from the fact that crypto payments allow for international transactions with lower foreign exchange fees. These lower rates attract more and more customers across the world. For instance, Kibbles, which is a pet food and supplies store in Singapore, have been receiving many orders from abroad due to crypto payments as the offered alternative.
The demand keeps growing. Payment service providers or crypto payment processors can vouch for this statement. Recently, they have associated themselves with many small and big merchants in Singapore. Apart from peer-to-peer transactions and blockchain payments, many business-to-business transactions are occurring via crypto payments in the country. All of these crypto payment processors or gateways receive official approval from the MAS to offer their services to various businesses across the world.
Cryptocurrency started its journey beginning in 2014 in Singapore when the first Bitcoin ATM was set up. And now, we can see the progress as the country expands to have businesses offering blockchain payments as the mode of payment to its customers. Whether it is a car dealer, travel agency, or pet shop, people have started paying in cryptocurrencies to these businesses and merchants. This is not surprising as the crypto payment processor converts the assets quickly, even in the case of overseas transactions. Singapore has noticed various advantages of cryptocurrencies, and thus, people are benefitting from the same. These advantages include:
- Cryptocurrencies are less impacted by geopolitical or macroeconomic factors.
- Cryptocurrencies are processed in lesser time - Blockchain payments take lesser time than banks to process crypto transactions between countries.
- Cryptocurrencies attract more customers - Cryptocurrencies come with an added advantage of a large customer base as younger donors are significant members of the global crypto community.
- Cryptocurrencies act as a "fancier option" - While banks may sound boring, cryptocurrencies and blockchain technology have become the talk of the town. They support the economy in several ways. In fact, on a related note, Bitcoin was invented during the global economic crisis of 2008, supporting the point in question.
There are many such advantages of cryptocurrencies that are being explored thoroughly by the citizens of Singapore. At all times, cryptocurrencies bring a fresh perspective to the economy owing to their essentialities and transformative nature. Singapore can achieve its goal of becoming a crypto-friendly country and the global hub of these digital assets by providing a conducive environment facilitating the trade of cryptocurrencies among businesses and consumers.