Cryptocurrency Regulations in Singapore

Government positions

In Singapore, virtual currencies are not regulated yet. However, the activities around them and the results of these activities may be subject to securities laws or other related regulations. This paves the way for tokens. For example, tokens that are only payment in nature, do not have a license, and are not securities can be sold overnight without permission from the Singapore government or financial authorities and only by setting terms and conditions. The main difference between Singaporean law and similar law is that not every token is considered a security because it has a collective investment or fundraising activity. Instead, whether securities are accounted for or not, a deeper examination is made as to whether they have the characteristics of securities, and only if they do, they need to be licensed. The rules of securities apply to them. In general, it seems that unless a virtual currency is considered securities by the Singapore Securities and Exchange Commission, no law will apply to it, and no special license will be required. In 2018, Singaporean economic authorities issued warning messages to eight digital currency exchanges, including Singapore’s most significant securities. The Government of Singapore does not take a strict stance on these exchanges.

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Legislation of cryptocurrencies

Singapore is commonly known as one of the paradises of digital currencies. It is a centre of the global economy and its balance of digital currency laws and regulations. The government has not designated virtual currencies (cryptocurrencies, tokens or coins) as a monopoly but has instead stated the following: Digital currencies are not currencies or currencies offered by any particular government. There is nothing wrong with using them as a means of payment for a product or service to someone willing to accept them. 3. They can not be used as a means of storing value because their prices fluctuate, and therefore the government does not recommend that people invest in them and take the risk of investing in them. 4. They are considered a personal asset because more and more people are buying and selling them. The Singaporean government encourages development and working on the Chinese bloc but says its positive stance on the Chinese bloc does not necessarily mean encouragement in the digital currency. Digital currencies are not the only application of the Chinese blockchain and have many other uses.

Sales rules

Virtual money can be sold in one of the following ways: 1. Private sale when Kevin was made: This can happen as part of a pre-sale at the ICO or selling and buying in the form of a newly created token. In general, this occurs under a private agreement. However, if a token is considered a security by Singapore’s monetary authorities, it must obtain the necessary ICO licenses and comply with securities laws. 2. ICO: It is treated as before. 3. Trading: There are no rules for small investors to buy and sell digital currencies. However, Singaporean economic authorities have issued a statement warning people to be very careful and be aware of the risks if they want to invest in digital currencies.

Taxation

1. Revenue from sales of products and services offered by virtual currencies: Businesses that accept virtual currencies as a payment method are subject to common tax laws in Singapore. For example, if a business accepts ether as a payment method, it is considered the same as ordinary currencies (fiat) and is subject to tax. The value of that virtual currency is calculated according to the currency’s price on the day the transaction made. Tax is calculated based on net profit. The tax rate for businesses in Singapore is currently 17% of their income.

2. Earnings Tax: Individuals or businesses that buy virtual currencies and hold them for long-term investment may earn a return on investment as their prices rise. Because there is no tax on investment income in Singapore, these profits are not taxable either. But if individuals or businesses continuously buy and sell virtual currencies for their business, their profit from trading is taxed. ICO Holding Tax: Whether holding an ICO in Singapore counts as income and is taxable. Over time, more guidance has been provided by Singapore’s domestic revenue authorities, although the rules are not yet fully understood. Under Singapore income tax law, income is taxable in two ways: (a) Income derived from Singapore. B) The income is earned outside Singapore and received in Singapore. In paragraph (a), the tax law states that any income from sales or business derived from taxpayers in Singapore is taxable. Buyers are not taxed if the token buyer resides outside Singapore. That’s why ICO terms and conditions state that Singaporeans cannot buy tokens. In position “b”, sales revenue is not taxed if it comes from outside Singapore.

3. Virtual Currency Sales Tax: The Singapore Internal Revenue Service has confirmed that the sale of tokens is considered a “supply of services” and is subject to taxes on goods and services. However, if the token buyer has nothing to do with Singapore, it can be seen as providing international services with a zero tax rate. Otherwise, if the buyers reside in Singapore, the tax rate is 7%; This rate will reach 9% between 2021 and 2025.

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Money transfer, customer recognition and anti-money-laundering laws

If digital currency tokens are considered securities, they are subject to Customer Recognition (KYC), Anti-Money Laundering (AML) and Anti-Terrorist Financing (CFT) laws. Also, all financial institutions must comply with the following rules:

1. Verify the customer’s identity, including name, unique national number, date of birth, nationality and residential address;

2. If the client was not an ordinary person, verify the identity of the person’s guardian;

3. Determine whether stakeholders can exist or not, if any, identify those persons;

4. They were determining the nature and purpose of business-to-customer relationships;

5. Visit the business location if needed;

6. They were obtaining information about the source of funds;

7. Continuous review of business communications after business communications have been identified.

8. Constantly check that customer information is adequate.

The Singapore Economic Organization has released a list of suspected terrorist activities and investigated all potentially suspicious token purchases. In addition, the Singapore government has compiled a list of countries and customers that are subject to sanctions that businesses are not allowed to work. Any suspicious transactions must also be reported and reported to the authorities within 15 days. Examples of transactions that are suspicious: Transactions that are not economically reasonable; 2. Transactions that involve large amounts of cash; 3. Transactions that affect a large volume of transactions through a bank account; 4. Transactions involving the transfer of money abroad; 5. Suspicious investment transactions; 6. Transactions involving unknown persons or identities; 7. Transactions related to tax violations; 8. Trades based on buying and selling with high differences. These rules do not specifically apply to tokens that do not count as securities. However, the best thing for businesses to do is to follow these guidelines.

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Ownership regulations and necessary permits

This section aims to answer the following questions: 1. Can Investment Managers Use Virtual Currencies to Invest ‌ Do they need a license similar to those who use Fiat currencies? If yes, what permissions do they need? 2. What kind of licenses does an investment advisor or investment manager, or capital markets consultant need in the field of digital currencies? ‌ What is the purpose of obtaining those licenses? Singapore financial authorities have not issued any guidance on whether who can use virtual currencies for investment purposes. For this reason, investment managers are advised to inquire with the Singapore Financial Institution before using virtual currencies. The Singapore Financial Authority requires companies active in capital management or financial consulting to obtain a “capital market services license”. If the assets under management are less than $ 250 million and the number of eligible investors is 30 or less, the company must become a registered capital management company. The Singapore Financial Authority estimates that applying for a license or registration process takes about 2 to 4 months. Economic consultants must also have a license for economic consulting.

Mining

There are currently no specific rules for digital currency mining in Singapore. A miner only needs special hardware, cooling devices and large amounts of electricity. But the miner must make sure that in the areas he has chosen for extraction, the laws of greenhouse gas emissions and noise generation are not violated. The miner must be cautious about the tax responsibilities that come with mining revenue. “Business profits from the extraction or sale of virtual currencies are taxable,” said the Singapore Internal Revenue Service website. At present, the business tax rate is 17% on net profit. Because digital currency mining is a job, every foreigner needs a work permit to do mining in Singapore. In addition, businesses hiring miners must abide by Singapore employment laws. However, mining is unlikely to be cost-effective soon due to high electricity prices, tropical climates and high property prices.

Reporting rules

Virtual currencies are generally decentralized and anonymous. There is currently no need to obtain a license to own, use or sell virtual currencies, except for the tax purposes mentioned above. Everyone is obliged to report any suspicious transactions to the relevant authorities, and digital currencies and tokens are no exception to this rule.

if you want to develop your crypto exchange platform and get some helpful information, check the article: cryptocurrency exchange website development in Singapore
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