Crypto regulation in Singapore
Singapore has emerged as a global leader in cryptocurrency adoption, showcasing significant growth in both ownership and usage of digital assets. As of 2024, approximately 24.4% of Singapore's population owns cryptocurrencies, a figure that far exceeds the global average of 6.8%. This positions Singapore as a frontrunner in Asia, ahead of countries like Japan and Hong Kong in terms of crypto ownership rates.
The integration of cryptocurrencies into everyday transactions is gaining momentum. Notably, the super app «Grab» has begun accepting cryptocurrency payments for its services, reflecting a broader trend where merchants are increasingly adopting crypto payment methods. In the second quarter of 2024 alone, the total value of crypto received by merchant services reached nearly $1 billion, indicating a substantial rise in usage.
The success of cryptocurrency adoption in Singapore can be largely attributed to its proactive regulatory framework. The Monetary Authority of Singapore (MAS) has implemented the Payment Services Act since January 2020, which regulates digital payment token services and provides clarity for crypto businesses. Currently, 19 cryptocurrency service providers are authorized to operate, with 17 holding major payment institution licenses.
Legal status of cryptocurrencies
Cryptocurrencies are absolutely legal in Singapore, but they are not considered legal tender. Instead, they are classified as digital payment tokens (DPTs) and treated as property rather than currency. This classification allows businesses to accept cryptocurrencies for payments, but such transactions are categorized as barter trade, not cash transactions.
The primary legislation governing cryptocurrencies in Singapore is the Payment Services Act, which came into effect in January 2020. This act provides a comprehensive regulatory framework for various payment services, including cryptocurrency exchanges and wallet providers. Under the PSA, entities offering DPT services must obtain licenses and comply with strict anti-money laundering and counter-terrorism financing regulations.
On August 15, 2023, the MAS finalized a regulatory framework specifically for single-currency stablecoins (SCS) pegged to the Singapore Dollar or any G10 currencies. This framework aims to ensure high value stability for stablecoins issued in Singapore and addresses concerns about their regulation under existing laws.
Stablecoins are defined as digital payment tokens designed to maintain a constant value against specified fiat currencies. The new framework applies only to SCS issued in Singapore, which must be pegged to the Singapore Dollar or G10 currencies. Issuers must maintain reserve assets that provide a high degree of assurance regarding value stability. These assets must meet strict criteria concerning composition, valuation, custody, and audit.
Virtual asset service providers (VASPs)
In Singapore, Virtual Asset Service Providers are regulated primarily under the same Payment Services Act, which establishes a comprehensive framework for digital payment token services. The MAS oversees the licensing and regulatory compliance of VASPs to ensure the integrity of the financial system while promoting innovation.
VASPs must apply for a license from MAS to operate legally. This includes providing detailed information about their business operations, compliance measures, and risk management strategies. A minimum base capital of SGD 100,000 (approximately USD 73,500) is required for VASPs to ensure financial stability and operational integrity.
VASPs in Singapore are subject to stringent AML/CFT requirements aligned with the Financial Action Task Force (FATF) standards. Key obligations include Customer Due Diligence, transaction monitoring and information sharing with local law enforcement authorities.
The Financial Services and Markets Bill, introduced in February 2022, expands the regulatory framework to include VASPs providing services outside Singapore. This means that VASPs based in Singapore must obtain licensing even if their services are offered internationally, ensuring MAS has adequate oversight over cross-border operations.
Singapore has a growing number of licensed Virtual Asset Service Providers operating under the regulatory framework established by the MAS, which includes Paxos, Coinhako, Crypto.com and others. Also, one of the biggest Singaporean banks DBS operates the DBS Digital Exchange (DDEx), which is a significant player in Singapore's cryptocurrency landscape. Launched in December 2020, DDEx was one of the first bank-backed platforms to offer cryptocurrency trading and related services in the region.
Mining
Cryptocurrency mining is not particularly popular in Singapore due to several unfavorable conditions. While the country has a vibrant cryptocurrency ecosystem, including exchanges and trading platforms, the local environment for mining presents significant challenges.
Singapore is known for its high land and labor costs, making it expensive to set up and operate mining facilities. The limited space available further exacerbates this issue, as land scarcity drives up real estate price. The cost of electricity in Singapore is also relatively high compared to other countries that are more conducive to mining operations. This factor significantly impacts the profitability of mining, especially for energy-intensive processes like Bitcoin mining.
For individuals mining cryptocurrencies, if done as a hobby, any gains from selling mined tokens are treated as capital gains and are not taxable. However, if mining is conducted systematically with the intention of profit, it may be treated as a business activity and subject to income tax.
Taxation
Singapore is recognized as one of the most favorable jurisdictions for cryptocurrency taxation, primarily due to its lack of capital gains tax and a clear regulatory framework.
Singapore does not impose capital gains tax on profits derived from the sale of cryptocurrencies. This means that individuals and companies can benefit from the appreciation in value of their crypto assets without incurring tax liabilities on the gains realized from such sales. If an individual or company engages in trading cryptocurrencies as part of their business activities, any profits generated from such activities will be considered income and subject to the standard corporate tax rate of 17% for companies or personal income tax rates for individuals.
The distinction between trading and investing is crucial; frequent trading may classify an individual as carrying on a trade, thus subjecting them to income tax on the profits. In contrast, holding cryptocurrencies as a long-term investment typically does not incur taxes on capital gains.
Cryptocurrencies received as payment for goods or services are taxable based on their fair market value at the time of receipt. This applies to both individuals and businesses.
This favorable environment has positioned Singapore as a leading hub for cryptocurrency activities in Asia, attracting both individual investors and businesses engaged in digital asset transactions.
