Singapore is looking to be one of the key players in Cryptocurrency. Bitcoin is not a legal tender in Singapore, but cryptocurrency trading is one of the main ways investors here invest in digital tokens.
However, Singapore’s central bank has placed a warning on the potential risks for retail investors who invest in cryptocurrencies, arguing that crypto prices are not anchored on any economic fundamentals and are subject to speculative swings. According to the financial regulator, Singapore is not rushing to develop a central bank digital currency.
Is it Legal to Own and Trade Bitcoin and Other Cryptocurrencies in Singapore?
Is cryptocurrency legal in Singapore? Simple answer, yes!
It is legal to own and trade cryptocurrencies in Singapore. Singapore was among the first countries to embrace DLT (Distributed Ledger Technology) and blockchain alongside Estonia and Switzerland.
It has, however, been recognized as a legal tender in El Salvador. However, cryptocurrencies and other virtual assets are not legal tenders in their country.
Singapore’s International Commercial Court made a precedent when it ruled that “the fundamental characteristics of tangible property” can be held by trust or custody. The ruling also established that owning Bitcoin and other cryptocurrencies was legal among Singaporean businesses and individuals.
What Can You Use Bitcoin and Other Cryptocurrencies for?
Merchants use Bitcoin and other cryptocurrencies as a means of exchange. The list of merchants accepting crypto is growing as time passes.
One of the largest trading sites, Amazon, jumped on the bitcoin bandwagon by accepting the virtual currency as a means of payment for their customers. Other stories in the US, such as Sears, Gap, and JC Penny, have started accepting Bitcoin.
However, only a few clubs and cafes have started accepting Bitcoin in Singapore. Here is a list of merchants that accept Bitcoin in Singapore.
What are the Distinct Characteristics of Bitcoin?
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No One Owns Bitcoin
The government controls all other currencies. Unlike them, Bitcoin is not owned by anyone. Bitcoin is decentralized, and users on the Bitcoin chain verify its transactions. The best part about it is that no government has the power to shut it down unless they can shut down the internet.
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Transparent
When Bitcoin first came into the limelight, it was the perfect way for crooks and criminals to transact. However, this is far from the truth. It is tough to use Bitcoin for crime because its network can easily be traced to its users.
Bitcoin transactions are logged in a public ledger where anyone can access them. Blockchain.info broadcasts every transaction done from the Cryptocurrency.
It is pretty transparent, and law enforcers can easily trace the exact day the bitcoin was mined, and this has dramatically helped arrest many criminals. However, it is not easy to link a transaction directly to an individual’s address.
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Low Transaction Cost
Bitcoin’s low cost has disrupted the banking and payment industry. Many banks and payment companies such as MasterCard and Visa make a lot of money off transactions worldwide.
Using Bitcoin, you can overcome 2 to 3% transaction costs, remittance taxes, and telegraphic transfer fees. Businesses can also share cost savings with their customers and eliminate the middlemen.
The low transaction costs make micropayments possible, enhancing crowd-funding and micro-lending activities.
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No Security Cost
With Bitcoin transactions, you do not need to reveal your data. Bitcoin transactions only require the receiver’s bank account numbers and the payees.
You do not need to disclose your credit card details or any other digital address. You will not be required to store your data or install any expensive security to protect it.
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Bitcoin is Not a Currency
The main limitation with Bitcoin is that it is only recognized as a digital asset and is not viewed as a currency even if it’s labeled as such.
Bitcoin is viewed as a commodity because:
- No one controls it.
- Only 21 million exist; hence its value is primarily affected by demand and supply.
- Bitcoin’s price is quite volatile.
Is Cryptocurrency Taxable?
Cryptocurrency is defined as a digital asset, hence an intangible property for tax purposes. Investors, therefore, must pay the goods and services tax on the difference between the sales and purchase prices. Cryptocurrency owned for more than one year qualifies for lower long-term capital gains of 0%,15%, and 20% based on the income.
Some countries such as Finland and Japan have classified Bitcoin as a commodity. It attracts GST in Singapore and attracts capital gain tax in other countries. Find out the best crypto exchanges in Singapore.
How to Legally Buy Bitcoin in Singapore?
There are three legal ways to buy bitcoin in Singapore. They include:
1. Bitcoin Exchange
This is the most common way of buying bitcoin in Singapore. The bitcoin exchange works like your broker and stock exchange. Bitcoin buyers and sellers come together on a platform, match the best prices, and facilitate trade while taking a small commission for the services.
2. Wallet
Before you buy bitcoin, you will need to have a way to store them. The bitcoin community has named these services “Wallet.” You will need a unique address to have access to your wallet. This wallet is the place where to send you bitcoin.
It is straightforward to open one. All you will need to do is go to your virtual wallet site and follow the instructions there. Some Bitcoin wallets available include Blockchain.info and CoinBase (US).
3. Exchange Brokers
These are platforms that trade Cryptocurrency. Some of the exchanges available in Singapore include; itBit, FYB-SG, and CoinHako.
To set up an account here, you will need to go through a verification process which will require you to present your identification (BIRC, Passport, or Driving License) and proof of address.
Once verified, you can easily start trading immediately.
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Third-Party Brokers
You can also buy bitcoin through a third-party broker. However, they are less preferred since most people can purchase bitcoin from crypto exchanges directly. Coin republic is a popular third-party broker in Singapore.
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Bitcoin ATMs
The first Bitcoin in Singapore was installed in 2014. The ATM works the same as a typical bank ATM. You deposit cash and convert it to Bitcoin, and you withdraw your money by converting Bitcoin to SGD.
Are Cryptocurrencies Regulated in Singapore?
The Monetary Authority of Singapore (MAS) enforced crypto laws in 2020 to regulate the crypto industry 2020 under the Payment Services Act. The legislation saves the users and protects the government from terrorist financing dangers and money laundering.
Cryptocurrencies and other digital payment tokens are regulated as digital payment token services and the Securities and Futures Act under Singapore Law.
The Payment Service Act requires all digital payment token services and cryptocurrency exchanges to be licensed. The Monetary Authority of Singapore also requires crypto firms to share information of anyone who makes a transaction beyond a given limit.
What is Bitcoin Mining?
Bitcoin mining is how bitcoin transactions are encrypted and then added to a public ledger. Miners will encrypt the transactions using mining software to crack the mathematical equations.
Those that crack the equation first get awarded the bitcoins. The more miners there are on a transaction, the more secure the transaction is.
What are the Risks of Bitcoin Investment?
Here are some of the potential dangers of investing in bitcoins.
1. Money Laundering
One of the most significant risks of bitcoin is money laundering. Money launderers have targeted bitcoin, making it fluctuate significantly in value. Cryptocurrency exchanges and wallets are also unstable since they efficiently target hackers.
2. Volatility
Cryptocurrency is a new concept in the finance world. It is still highly speculative since the prices are volatile and are vulnerable to economic changes, country policies, and many others.
Investors need to deal with the volatility risk and do their due diligence to practice sound capital allocation.
3. ICOs (Initial Coin Offering)
According to the Monetary Authority of Singapore’s press release, the use of ICOs in money laundering is a huge concern due to the anonymous nature of the transactions.
4. Prone to Scams
As cryptocurrencies gain popularity, scams are becoming more common, significantly less informed. To avoid being a victim, make sure you understand how bitcoin and cryptocurrencies work.
Should You Invest in Bitcoin?
Bitcoin has gained massive traction over the recent years. It is currently a viable investment tool since it makes a lot of money.
Some merchants have already adopted it as a means of exchange. However, before you dip your foot in crypto, keep in mind that it is incredibly volatile. This hardly gives anybody the confidence to use it as currency.
Related Questions
1. Is it Safe to Invest in Cryptocurrencies?
Investing in Cryptocurrency is a risky venture but can be very profitable if you want a good investment when you want to gain direct exposure to the digital currency demand. A safer but less lucrative alternative is investing in stocks of companies that have exposure to Cryptocurrency.
2. What are the Other Alternatives to Bitcoin?
Other alternatives to bitcoin include:
- Ethereum (ETH)
- Litecoin (LTC)
- Cardano (ADA)
- Polkadot (DOT)
- Bitcoin Cash (BCH)
- Stellar (XLM)
- Dogecoin (DOGE)
- Binance Coin (BNB)
3. What is Bitcoin Mining?
Bitcoin mining involves solving complex mathematical problems to create new bitcoins. Solving the math problem verifies the transactions on the Bitcoin network. When a bitcoin is successfully mined, the miner receives a predetermined bitcoin.
4. Is Cryptocurrency Taxable in Singapore?
Yes.
Previously cryptocurrencies were taxable under the Good and Services Tax (GST) for their income received. However, the practice has since been discontinued when the Inland Revenue Authority of Singapore (IRAS) reviewed the GST requirements for Digital Payment Token service.
The Inland Revenue Authority classifies cryptocurrencies as Digital Payment Tokens and are taxed as such. Businesses that buy and profit from selling their cryptocurrency holdings do not pay tax on their sales.
There is no capital gain tax in Singapore. However, if the payoff is from trading other virtual assets often through regular business activity, then it is taxable.
Our Final Thoughts
Bitcoin has been a trendsetter in the cryptocurrency world and is legal in Singapore. Singapore has established regulations through the Monetary Authority on Cryptocurrency trading in the country. You can buy Bitcoin and other cryptocurrencies through crypto exchanges, exchange brokers, third-party brokers, and Bitcoin ATMs.
Investing in Cryptocurrency can be a lucrative endeavor, but it is highly volatile. You must understand how crypto works before you put your money in it.
Key Takeaways
- Bitcoin is legal in Singapore and is regulated by the Monetary Authority of Singapore
- Bitcoin leads the pack for all other cryptocurrencies
- Investing in bitcoin and other cryptocurrencies can be very lucrative but very volatile
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