Is cryptocurrency legal in Singapore? Short answer: yes. Singapore’s Bitcoin and crypto regulations and laws cover ICO, tax, AML/CFT and methods of buying/trading in virtual assets.
Singapore is well-known for being a strict country in regards to laws and regulations. However, Singapore takes a balanced approach to cryptocurrency and Bitcoin regulations and is referred to by many in the industry as a ‘Crypto Haven’. The legality of Bitcoin and cryptocurrencies have been firmly embedded into a number of pieces of legislation, making cryptocurrency trade, custody and other activities legal in Singapore.
The Monetary Authority of Singapore has been experimenting with their own e-money DLT-based currency on the Ethereum chain since 2016 – ‘Project Ubin’. The island nation is also a major financial and trade hub of Asia, attracting many financial institutions (FIs), investors and startups.
Singapore Cryptocurrency Regulations Key Takeaways;
- Cryptocurrency is Legal (As Property, Not Legal Tender)
- Regulator: Monetary Authority of Singapore
- AML/CFT Laws in Singapore are Strict
- Securities and Futures Act Covers ICOs
- Payment Services Act Covers Exchanges
- Singapore Does Not Tax Capital Gains on Crypto
Is Cryptocurrency Legal in Singapore?
It is legal to own and trade Bitcoin and other cryptocurrencies in Singapore. Singapore was one of the first countries to embrace blockchain and DLT (distributed ledger technology), alongside other ‘Crypto Havens’ such as Switzerland and Estonia.
Bitcoin and other cryptocurrencies, or ‘virtual assets’, are however not legal tender. In 2019, Singapore’s International Commercial Court created a precedent when it ruled that cryptocurrency has “fundamental characteristics of intangible property” that can be held in trust, or by custody. From this ruling alone, the legality of owning Bitcoin and other cryptoassets is certainly no longer in question for Singaporean individuals and businesses.
For businesses trading in cryptocurrencies, offering custody to retail users and a number of other activities, applying proper KYC (Know-Your-Customer), AML (Anti-Money Laundering), and CFT (combatting the Financing of Terrorism) checks are a legal requirement.
Is Cryptocurrency Taxable in Singapore?
Cryptocurrencies were taxable in Singapore under the Goods and Services Tax or ‘GST’ for income received in regards to a business. However, this practice was discontinued when the IRAS (Inland Revenue Authority of Singapore) reviewed GST requirements for Bitcoin and other cryptocurrencies or ‘Digital Payment Tokens’.
IRAS classes Bitcoin, Ethereum and other decentralized cryptocurrencies as Digital Payment Tokens. So-called stablecoins such as USDT that is “denominated in any fiat currency or with a value pegged”, may however have GST applied (this exception is made to negate the possibility of people using stablecoins to circumvent a taxable transaction).
Businesses and individuals who buy and profit from the rise in the value of their cryptocurrency holdings in Singapore do not pay tax on their sale, as there is no such thing as Capital Gains Tax in Singapore (if profit is gotten from trading virtual assets regularly via the course of normal business activity, this is taxable).
The Inland Revenue Authority of Singapore (IRAS) is responsible for the tax collection of the country.
How to Buy Cryptocurrency in Singapore (Legally)?
Being classed as property, Bitcoin and other cryptocurrencies can be legally bought in Singapore from Bitcoin ATMs (there are currently 8 Bitcoin ATMs), exchanges (OTC and otherwise) and some banks (DBS, a heavyweight FI in the country and region became one of the first FIs in the world to enable trading of cryptocurrencies in their in-house platform).
Cryptocurrency Mining Regulations of Singapore
There is no legislation in the Republic of Singapore that specifically relate to the mining of Bitcoin and other cryptos, although mining of cryptocurrency and Bitcoin in Singapore is not illegal.
However, as the cost of energy and space in Singapore is relatively high compared to neighboring countries, the prevalence of mining crypto in Singapore has decreased over time.
Crypto miners in Singapore must pay taxes on profits derived from the activity. The IRAS states that profits coming from operations that mine/trade virtual asset in exchange for money are also subject to tax. How much? The Income Tax Act (ITA) stipulates a 17% tax rate on net profit.
Are Cryptocurrency Exchanges in Singapore Regulated?
Bitcoin exchanges in Singapore are legal if licenced and regulated by the Monetary Authority of Singapore (the country’s central bank and financial regulator).
This licencing stipulation was brought into law with the passing of the Payment Services Act (see ‘Cryptocurrency AML Laws in Singapore’ below) in January 2020.
Singapore is a popular jurisdiction for cryptocurrency exchanges to be based due to the low corporate tax rate (17% flat rate) and the crypto-centric progressive environment. as of 2021, there are more than 230 blockchain native organizations based in the country.
Cryptocurrency ICOs in Singapore
Initial Coin offerings (ICOs) in Singapore are regulated under the Securities and Futures Act. Companies looking to carry out such regulated services must obtain a Capital Markets Service (CMS) licence first.
Some coins in ICOs could be classed as financial securities under Singapore law, which translates to an expensive and difficult process. Because it is a global financial hub, there is extensive legislation on the issuing of financial securities to retail investors, e.g. registration of a prospectus.
In 2017 – in the wake of the ‘ICO Boom of 2017’ – it was made official that MAS will regulate the issuance of virtual assets in Singapore if it is deemed they fall under the scope of the Securities and Futures Act (SFA).
The question of whether an ICO is a financial securities offering (or for example a futures contract/derivative) under the guidance of MAS depends on:
- If coin(s) are bought and received on/around the same date of going into the Initial Coin Offering ‘purchase contract’, instead of specified future dates.
- If discrepancies are found between settlement values of the coin(s) at different moments of time between issuer/buyer.
- If possible profit/loss of the ICOs ‘investors’ realize on coin(s) affect the issuer financially (gain, loss, and financial contracts based on either).
- If coins are specified as a “stake/right” against or in the issuer which might be ‘called’ at a future date.
Cryptocurrency AML Regulations in Singapore
Whilst cryptocurrency in Singapore is legal and the regulations regarding Bitcoin and other Digital Payment Tokens are comprehensive and open to innovation – cryptocurrency AML and CFT laws in Singapore are stringent.
In 2019, Singapore passed the Payment Services Act (PSA), which sought to clarify the legal status of cryptocurrencies or ‘Digital Payment Tokens’ and how they should be regulated.
Singapore Payment Services Act Scope
Singapore’s Payment Services Act (PSA) applies to a wide range of payment providers, namely;
- Account issuance: Businesses providing accounts to users for the explicit goal of payments.
- Local & global money transfer services: Businesses enabling cross-border/domestic transfers.
- E-money issuers: Businesses enabling the issuance of e-money to be stored in e-wallets, transferred and used to purchase goods/services. FIs tend to fall under this category.
- Merchant acquisition: Businesses enabling payments on behalf of other businesses within the Republic of Singapore.
- Digital Payment Token services: Businesses enabling digital payment tokens (DPT) to be exchanged on a platform or buying/selling DPTs.
- FX: Businesses enabling the buying and selling of FX in Sing.
Singapore Payment Services Act Basic Compliance Requirements
- SARs: Operations must send SARs to MAS, with a formal internal process in place. Companies must also keep detailed records of users’ for AML (Anti-Money Laundering) and CFT (Combatting the Financing of Terrorism) checks.
- Tx monitoring: Obliged entities must monitor counterparties to Txs for red flags of ML and TF.
- Screening: Obliged entities must cross-check users against sanctions lists, PEPs and adverse media.
- Customer Due Diligence (CDD): Obliged entities must carry out KYC (Know-Your-Customer) checks to identify/verify their users.
Singapore AML/CFT Regulations
To comply with CDD requirements, MAS needs DPT-related businesses to collate users’ legal names, IDs, residential/business addresses, and DoB (DoI for commercial enterprises).
The “PSN02 Prevention of Money Laundering and Countering the Financing of Terrorism (Digital Payment Token Service)” is a set of AML/CFT updates in December 2019 (incorporated into law in Jaunray 2020) for compliance, specifically catering to Digital Payment Tokens.
The PSN02 notice sets out additional monitoring and reporting requirements that are excluded in the PSA, such as;
- Recurring and cumulatively big Txs without a ‘real’ basis
- Recurring transfers of DPTs to one beneficiary
- Recurring Txs for the purchase/sale of DPTs in a short timeframe
- Many multiple of DPT Txs so that the value of one transfer may not be large to raise red flags – however a total which is large
PSN02 also takes aim at anonymous transactions and so-called ‘privacy coins’ when stating that those entities regulated under PSA must consider whether the service is attempting to “promote anonymity, obfuscate
transactions or undermine the payment service provider’s ability to identify its customers”, and that further due diligence KYC checks on customers must be made that incorporate a user’s “occupation, employer’s name, nature of business, range of annual income, and whether the customer holds or has held a prominent public function.”
Monetary Authority of Singapore: MAS
MAS or the ‘Monetary Authority of Singapore’ is Singapore’s central bank and financial regulatory authority.
MAS enforces legislation relating to the financial sector. As the central bank, MAS is additionally responsible for the Singapore Dollar’s currency issuance. Singapore is known as a global financial and technology hub.
MAS was given regulatory powers under the Monetary Authority of Singapore Act (MAS Act).
MAS Regulatory Sandbox
The Monetary Authority of Singapore operates a regulatory sandbox. Regulatory sandboxes are spaces where startups can experiment with their offerings in a controlled environment before becoming available to retail and institutional users.
To read more about MAS’ Sandbox, download the “Fintech Regulatory Sandbox Guidelines”.