Crypto Regulation in Singapore
Cryptocurrencies are regulated by the Monetary Authority of Singapore107 (MAS). The Payment Services Act of 2019 regulates traditional and cryptocurrency payments and exchanges. The Securities and Futures Act is also applicable to public offerings and issues of digital tokens.
A May 2020 Guide to Digital Token Offerings108 published by the MAS details the regulations surrounding digital tokens and their applicability to securities, collective investments, derivative contracts, and the determination of whether a token is a type of “capital market product.” T
The AML/CFT provisions under the PSA address the risk of financial crimes and promotes best practices, including KYC, to help crypto businesses comply with the new regulatory framework. In February 2022, the MAS issued Guidelines to Discourage Cryptocurrency Trading by General Public109. The new guidelines clarify the expectations that digital payment token (DPT) service providers should not engage in marketing or advertising of DPT services to the general public in Singapore. The Inland Revenue Authority110 has said, “Businesses that choose to accept digital tokens such as bitcoins for their remuneration or revenue are subject to normal income tax rules. They will be taxed on the income derived from or received in Singapore. Tax deductions will be allowed, where permissible, under our tax laws.”
Source: Thomson Reuters
In Singapore, cryptocurrency exchanges and trading are legal and the city-state has taken a friendlier position on the issue than some of its regional neighbors. Although Singapore’s cryptocurrency rules mean that digital payments tokens (DPT) are not yet considered legal tender, Singapore’s tax authority treats Bitcoins as “goods” and so applies Goods and Services Tax (Singapore’s version of Value Added Tax).
The Monetary Authority of Singapore (MAS) has adopted a neutral position on the growth of cryptocurrencies. In 2017 it clarified that, while it would not seek to regulate virtual currencies, it would regulate DPT if they were classified as “securities”. Although it has taken an even-handed approach to date, in 2020 MAS issued warnings to the public of the risks of investing in cryptocurrency products.
Source: Comply Advantage
Singapore recently passed a law that will tighten rules for cryptocurrency service providers in the city-state.
The legislation, the Financial Services and Markets Bill, requires digital asset providers created in Singapore but that conduct business overseas to be licensed and subject to local Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) requirements.
New legal and regulatory frameworks indicate a proactive willingness on Singapore’s part to acclimate to the cryptocurrency ecosystem, unlike its neighboring countries, which have imposed outright bans on the digital payments sector. China has opted for complete prohibitions on cryptocurrency trading; so has Indonesia and, most recently, Thailand.
Source: Law
In early 2022 the legislative environment and high rate of cryptocurrency adoption changed when MAS issued a new circular curbing advertising and third-party promotions and caused ATM operators to shut down.
As of now, the Singapore regulator has not backed any cryptocurrency for retail use. And in January 2022, MAS issued guidelines to discourage cryptocurrency trading by the general public. Chris Holland, a partner at regulatory consulting firm Holland & Marie, noted: “The MAS has stated that DPT service providers should conduct themselves with the understanding that trading of DPTs is not suitable for the general public. Beyond advertising restrictions, we anticipate industry participants to start implementing suitability tests to ensure customers understand the risks of cryptocurrencies.”
Source: mco.My Compliance Office
Singapore is stepping up its efforts to regulate the domestic digital currency industry, this time targeting firms that are based in the country but offering their services outside the city-state.
Last week, lawmakers in Singapore approved the Financial Services and Markets Bill 2022, which further expanded the jurisdiction of the Monetary Authority of Singapore (MAS), the country’s de facto central bank and digital currency regulator. The law covers virtual asset service providers (VASPs) who in digital currencies, exchanges, and firms that offer financial advice on the sale of such currencies and tokens.
Under the previous regulatory regime, the MAS only had authority over VASPs, which were based in the country and offered their services locally. This led to some regulatory loopholes in which a firm could claim to be regulated by the MAS, which is a reputable watchdog globally, but not be directly supervised by the regulator.
Source: Coingeek
The purchase of cryptocurrencies will not trigger a taxable event in Singapore. However, the intention at the point of purchase would be considered to determine the tax treatment of gains/losses from the subsequent disposal of the cryptocurrencies.
An individual may receive cryptocurrencies from the provision of services (including employment services and any other form of services) or from the sale of goods. The cryptocurrencies received by the individual will be taxable in the hands of the individual based on the value of the services performed by the individual or the value of the goods sold by the individual.
An individual may also receive cryptocurrencies from mining activities. Generally, an individual engaging in mining activities will be considered as undertaking the activity as a hobby. Gains from the sale of the mined cryptocurrencies are treated as capital gains and are not taxable. Mining expenses will not be deductible. However, if an individual shows a habitual and systematic effort to make a profit from the activities, he may be considered as carrying on a vocation of a miner and his profits from the sale of the mined cryptocurrencies will be subject to tax.
Source: Crowe
MAS’ pragmatic approach to Singapore cryptocurrency exchange regulation has seen it apply existing legal frameworks where possible. In January 2018, MAS issued a press release warning the public of the risks of speculating with cryptocurrency, while Deputy Prime Minister Tharman Shanmugaratnam stated that cryptocurrencies are subject to the same AML and CFT measures as traditional fiat currencies. A year later, the Payment Services Act 2019 (PSA) was passed, bringing exchanges and other cryptocurrency businesses under the regulatory authority of MAS from January 2020 and requiring them to obtain a MAS operating license.
In January 2021, MAS amended the PSA to reflect changes in international AML standards and in the sophistication of criminal money laundering methodologies. The amendments broadened the scope of the PSA to include the transfer of cryptocurrencies and custodial wallet service providers. Under the amendments, MAS also now has greater regulatory powers over Singapore’s cryptocurrency service providers and can, for example, require them to safe keep customer assets.
Source: Comply Advantage
Singapore’s recent efforts to regulate cryptocurrencies and cryptocurrency services have attracted attention from international crypto-space businesses. Following China’s 2021 crackdown on cryptocurrency businesses, for example, many high-profile Chinese crypto firms, such as ByBit, Huobi, Cobo, and OKCoin, migrated to Singapore.
In April 2022, following the move to reduce cryptocurrency promotion, Singapore’s parliament continued its consideration of the Financial Services and Markets Bill which includes measures to expand MAS’ ability to address cryptocurrency money laundering. Under the new rules, cryptocurrency firms that are created in Singapore but that provide their services overseas will need to register with MAS and obtain an operating license. The legislation reflects Singapore’s intention to enhance its global reputation as a safe destination for cryptocurrency services. You can find out more about the implications of the legislation for crypto firms in our blog.
Source: Comply Advantage
Experts told Money Mind the main risks are bad investments in obscure coins, getting into crypto projects that fail, and falling for scams.
Besides the unregulated nature of crypto, scammers are using stories of people who have struck it rich to “play on the greed of investors”, said Choo Oi Yee, chief commercial officer for private capital platform ADDX.
Source: Channel News Asia
Singapore police received 533 reports of crypto-related cheating, fraud, or other crimes between 2018 and last year, of which 393 were made last year. Investors lost around S$29 million.
This is despite the Monetary Authority of Singapore (MAS) warnings that cryptocurrencies are volatile and “highly risky” investment products unsuitable for retail investors.
Source: Chanel News Asia
The FinTech Regulatory Sandbox guidelines set out the objective and principles of the sandbox, and provide guidance to the applicant on the application process, the main evaluation criteria and the information to be furnished to MAS.
Source: mas.gov.sg
The FinTech Regulatory Sandbox framework enables financial institutions and FinTech players to experiment with innovative financial products or services in a live environment but within a well-defined space and duration.
Depending on the experiment, MAS will provide appropriate regulatory support by relaxing specific legal and regulatory requirements prescribed by MAS, which the sandbox entity will otherwise be subject to, for the duration of the sandbox.
The sandbox will include appropriate safeguards to contain the consequences of failure and maintain the overall safety and soundness of the financial system.
Upon successful experimentation and on exiting the sandbox, the sandbox entity must fully comply with the relevant legal and regulatory requirements.
Source: mas.gov.ph
