One of Asia's most prominent financial centres, Singapore, already an internationally recognised jurisdiction with favourable tax laws, is emerging as a major trading hub for digital securities backed by financial assets. Currently, the most renowned blockchain-based companies in Singapore are cryptocurrency trading platforms such as Coinhako and Binance. With government-backed initiatives, such as the Singapore Blockchain Innovation Programme (SBIP) and clear rules and regulations, the blockchain tech talent pool continues to grow.
PwC Singapore survey for the Singapore Blockchain Ecosystem Report 2020 assessed the developments of blockchain-related activities in Singapore. Results showed that blockchain emerged as one of the top three technology trends in Singapore for 2021, with 70% of the respondents showing support for the technology. The Monetary Authority of Singapore (MAS) has been exploring the use of distributed ledger technology for clearing and settling payments and securities since late 2016. While countries like China and India are cracking down on cryptocurrencies and any trading related to them, Singapore is outlining clear rules of engagement.
What is blockchain technology and how does it work?
The simplest blockchain definition would be a specific kind of database or digital ledger which stores data in blockchains (blocks that are then chained together). Blockchain is the technology that enables the existence of cryptocurrencies such as Bitcoin. The bitcoin blockchain is used in a decentralised way so that no single person or group has control, rather, all users collectively retain control. A blockchain wallet is a digital wallet that allows users to store and manage their bitcoin or ether. It is an e-wallet that allows individuals to store and transfer cryptocurrencies, with dynamic fees based on factors such as transaction size. Using this technology, participants can confirm transactions without a need for a central clearing authority because its supply is not determined by a centralised bank.
What is cryptocurrency?
Cryptocurrencies are digital, virtual currencies with strong protection via cryptography and algorithms. Blockchain technology distributes secure online ledgers of every transaction, making cryptocurrencies almost impossible to counterfeit.
Singapore is one of the few countries in Asia where the purchase and exchange of cryptocurrency is legal. Below section walks you through the regulations, projects, and the use of cryptocurrency and blockchains in Singapore. All the more reasons why the country is set towards becoming a cryptocurrency hub in Asia.
Singapore blockchain regulations
Singapore blockchain regulation is clearly outlined, which contrasts with other Asian countries which have banned cryptocurrencies and/or Initial Coin Offerings or where there is significant regulatory uncertainty. The Singapore Payment Services Act 2019 (PS Act) regulates intermediaries dealing with certain cryptocurrencies, with a particular focus on consumer protection and anti-money laundering. It provides a stable regulatory licensing and operating framework for cryptocurrency entities, such as cryptocurrency exchanges.
Tax benefits for cryptocurrency in Singapore
Businesses based in Singapore that buy and sell virtual currencies are taxed on the profits as if they were income. However, businesses that hold cryptocurrencies for long-term investment purposes are not taxed in Singapore as the country has no capital gains tax.
Singapore government-backed initiatives & organisations for blockchain
The Blockchain Association Singapore (BAS) – This organisation empowers its members and the community to leverage blockchain and scalable technologies for business growth and transformation. It was designed to be an effective platform for members to engage with multiple stakeholders to explore solutions and promote best practices collaboratively and transparently. It promotes blockchain literacy and a strong talent pool for Singapore’s digital economy.
Singapore government blockchain initiatives - Singaporean government agencies are now launching a new research programme for blockchain technology with SGD$12 million (about USD$8.9 million) in funding. Called the Singapore Blockchain Innovation Programme (SBIP), the project is a collaboration between Enterprise Singapore, Infocomm Media Development Authority and the National Research Foundation Singapore. It also has support from the Monetary Authority of Singapore, the country’s central bank and financial regulator.
Recently, the Singapore government used blockchain in a newly innovative way, to verify COVID-19 test results. They adopted a new standard for protecting the verification of global health documents based on tamper-proof distributed ledger blockchain technology. Called HealthCerts, it comprises a set of digital open standards for issuing digital COVID-19 test results and vaccination certificates. The government is keen to work with partners to further its development.
The use of bitcoin & other cryptocurrencies in various industries
What began as the basis of cryptocurrencies such as Bitcoin, blockchain technology is now spreading to other industries. Singapore Airlines’ KrisPay is a digital wallet built on a blockchain that securely turns miles into cryptocurrency that can be used with merchant partners. In addition, Daimler has partnered with Singapore-based Ocean Protocol, a decentralised data exchange, to research how blockchain could be used to share supply chain data among its manufacturing hubs and partners. You could say that future potential of blockchain potential in Singapore is limitless.