Cryptocurrency Regulations in Singapore
Cryptocurrency traders in Singapore have much to cheer about as its city-state has adopted a friendlier position when it comes to cryptocurrency trade in Singapore. While cryptocurrency trading and exchange in Singapore is legal and is tax according to the standard goods and services tax, one can’t say the same about some of the other countries. For instance, China considers cryptocurrency exchange to be illegal and has come up extremely harsh cryptocurrency regulations to curb its growth. There’s a similar story of harsh regulations in India, which effectively banned financial institutions from dealing in cryptocurrencies. Some of the governments in the world are sceptical about the growth of cryptocurrency trade. But, Singapore has been relatively open to the idea based on the cryptocurrency regulations in Singapore that we have analysed.
The Monetary Authority of Singapore or the MAS has not imposed special regulations on cryptocurrency exchanges. However, the MAS has applied the existing legal frameworks wherever they could accommodate them. We also have to consider the statement made by Sopnendu Mohanty, the MAS FinTech chief, when he emphasized the need to bring in legislative measures to ensure the growth of cryptocurrency exchange. This approach seems balanced as the MAS doesn’t intend to stop cryptocurrency trading at all. Although it has, like a responsible financial body of such a profile, issued requisite warnings the common people genuinely need.
Singapore doesn’t consider cryptocurrencies such as bitcoin a legal tender. It instead considers cryptocurrencies as goods that can buy and sell. And, as the rule applies to commodities that can sell for a gain, these commodities are tax accordingly. Given the fact that MAS considers cryptocurrencies as goods, GST can be imposed accordingly. The GST is imposed on the gains that a trader realises on each transaction. It is for this reason that businesses are supposed to report the sale of cryptocurrency as and when applicable. Naturally, a sale must record on the basis of the prevailing market value of the cryptocurrency.
Those who are considering cryptocurrencies as a means to a long-term investment have much to thank the MAS as they will not tax for their investment as Singaporeans aren’t subject to a capital gains tax.
Set of Warnings Issued by the Monetary Authority of Singapore
As the MAS sensed growing interest in Bitcoin and cryptocurrency investment, it issued a comprehensive list of warnings to the public on its official website and urge them to fully understand the set of risks associated with such an investment. The MAS also responsibly mention that cryptocurrencies are not, ultimately, legal tender, as it isn’t back by any government or any government securities.
The MAS also pointed out the fact that there is no existing regulatory safeguard for cryptocurrencies, similar to the existing practice in other countries. And, since MAS doesn’t consider cryptocurrency as a legal tender, it doesn’t concern itself with the safety and reliability of the intermediaries who regularly deal with cryptocurrencies. Besides that, neither does it concern itself with a standard cryptocurrency transaction. The entire premise of these lack of safeguards is to convey that those who have invested in cryptocurrencies only to suffer losses are not eligible for any protection under the legislation put forth by the MAS.
Risks of Fraud
Not all cryptocurrency trading platforms are based in Singapore and that makes it difficult for the local bodies to administer each of these platforms. The MAS openly stated on its website that it’s not possible for them to verify or authenticate every cryptocurrency platform. This makes common people susceptible to fraud and malpractice, and that’s exactly what the MAS dutifully issued a warning against.
While the Monetary Authority of Singapore is fairly open to the idea of cryptocurrency trading and exchange in general. They have a set of their own reservations and concerns about the act itself. The prime of these concerns is about the misuse of cryptocurrency. The MAS is concerned about the possibility of cryptocurrency being misused for any money laundering practices, a financial racket, or even to finance any grievous terrorist activity. To prevent such practices, standard currencies are subject to the requisite AML and CFT measures. And, cryptocurrencies will also be subjected to the same measures as per the Jan 2018 statement made by Tharman Shanmugaratnam, the Deputy Prime Minister.
Sticking to its policy of not directly regulating cryptocurrencies the MAS did. However, stress on the need to mandate cryptocurrency intermediaries into making them abide by the anti-laundering rules it sets forth. This can understand by the statement MAS official make on the subject: “Virtual currencies first emerged about 10 years ago. Since then, we have observed an increase in the number of initial coins (or token) offerings in Singapore. As with most financial regulations, MAS does not regulate virtual currencies. But we regulate the activities that surround virtual currencies if these pose specific risks.”
This objective of the MAS, however, brings out the need for a more compact regulatory framework with regards to the domestic cryptocurrency sector, which is witnessing steady growth. And, it is clear, at this point, that Singapore doesn’t intend to go the China way by outright banning cryptocurrency on a whole, it just intends to better administer it. Another important development recently occurred, in a positive move. MAS is considering bringing in additional measures to better protect the interests of its domestic investors.
To conclude, the cryptocurrency regulations in Singapore are perhaps the friendliest in the world and a testament to the fact is that many Indian cryptocurrency exchanges are now based in Singapore, away from the harsh regulatory reality of their domestic government.
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