Selva Ozelli, an international tax attorney and CPA, writes a column called Expert Take. In it, she discusses how new technologies relate to sustainability, and provides information on taxes, anti-money laundering/combating the financing of terrorism regulations, and legal issues affecting cryptocurrency and blockchain.
Singapore was deemed the most crypto-friendly country in the world by global crypto rating company Coincub at the end of 2021. This was due to its “robust economy, positive legislative environment, and high rate of cryptocurrency adoption.” Bitcoin (BTC) and Ether (ETH) had risen 100% and 300%, respectively, during that year.
Cryptocurrency consumer protection law
Singapore’s regulators have been very supportive of the blockchain industry. The Monetary Authority of Singapore (MAS) was quick to implement regulatory measures when the cryptocurrency market began crashing in January 2022, proving that its No. 1 ranking by Coincub was justified.
During mid-January, Singapore’s MAS enacted consumer protection laws for investors exposed to constant reminders of digital assets via billboard ads or crypto ATMs. The laws ban all cryptocurrency-related advertisements and ATMs in public spaces.
A recent ban on cryptocurrency advertisements by major tech platforms like Google, Facebook, and Twitter has led many in the space to wonder if this is just a one-time event or the start of a new phase of global regulation. Many in the cryptocurrency space are wondering if the recent ban on cryptocurrency advertisements by major tech platforms is just a one-time event or the start of a new phase of global regulation.
MAS is encouraging blockchain technology development and innovative crypto use cases, but is cautioning that cryptocurrency trading is risky and not suitable for most people. They don’t want cryptocurrencies to be portrayed as less risky than they actually are.
Payment Services Act, January 2020
In January 2020, Singapore’s Payment Services Act came into effect as a response to the Financial Action Task Force’s 2018 update to its Anti-Money Laundering (AML) and Combatting the Financing of Terrorism (CFT) cross-border risk guidelines for cryptocurrencies. The Payment Services Act is a set of guidelines for the regulation of payment systems and providers in Singapore. Businesses that deal in cryptocurrency must register with the government and follow guidelines for anti-money laundering and countering the financing of terrorism.
While many companies have applied for cryptocurrency licenses from the Monetary Authority of Singapore (MAS), few have actually been approved to operate in the country. DBS Bank, OCBC Bank, IBM, and two institutional-grade Bitcoin funds launched by Singapore-based fund manager Fintonia Group have all received licenses to operate.
Initial coin offerings
In August 2017, MAS first published guidelines in response to a wave of initial coin offering launches, indicating that if an ICO was deemed to be issuing a security, it would be subject to regulation. This was followed by MAS issuing a guide that provides further explanation and direction on the regulation of cryptocurrencies in Singapore.
Taxation of cryptocurrencies
Singapore is a low-tax jurisdiction. Exempting digital payment tokens from goods and services tax will make Singapore more attractive to cryptocurrency businesses, said Desmon Teo and Lee Vin Wee of Big Four accounting firm Ernst & Young. This means that any gains made from selling cryptocurrencies are not subject to capital gains taxes.
Blockchain adoption
Singapore has quickly become a global cryptocurrency hub due to its favorable regulatory and tax infrastructure, as well as its use of blockchain technology in many areas of its economy. With the tenth-highest GDP per capita, Singapore is a major financial center and shipping hub. MAS believes that crypto and blockchain have a lot of potential, especially when it comes to speeding up cross-border payments and trade finance. However, they don’t think that cryptocurrencies are good investment assets for regular people.
Cryptocurrency exchanges
According to one survey, 43% of Singaporeans own cryptocurrency. On average, people in South Africa, the United States, and Sweden own about 11.3%, 10.5%, and 9.8% of all the cryptocurrency in circulation, respectively.
Retail investors can trade cryptocurrencies on a multitude of different exchanges, some of which include Coinbase, Kraken, FTX, Bybit, KuCoin, Vauld, Independent Reserve, Gemini, Coinhako, Tiger Brokers, Futu’s Moomoo, and Syfe. Binance, the world’s largest cryptocurrency exchange, has announced that it will be discontinuing its operations at Binance Singapore by mid-February 2022. Prior to this announcement, Binance had acquired an 18% stake in Hg Exchange, a Singapore-regulated private securities exchange. This was announced by Reuters who did a special report on Binance’s corporate structure. It is said that their structure is not good for global AML and CFT compliance.
The announcement by Huobi, one of the world’s largest crypto exchanges, that it would be shutting accounts in Singapore by the end of March 2022, caused a stir. SIX Swiss Exchange’s sister company, SIX Digital Exchange, has announced a partnership with SBI Digital Asset Holdings, a division of Japanese banking and financial services giant SBI Group, to establish a crypto exchange and central securities depository in Singapore. The joint venture, called Asia Digital Exchange, is designed to create a regulated, global liquidity pool for digital assets between Asia and Europe. The goal is to make it easier for Asian investors to buy European assets and vice versa.
Banking
Many large banks, such as Barclays, BNP Paribas, BNY Mellon, Citi, Deutsche Bank, HSBC, Orient Securities, Standard Chartered, Societe Generale and United Overseas Bank, have partnered with Marketnode. Marketnode is a digital asset joint venture created by the Singapore Exchange (SGX) and Temasek, a government-owned investment firm. The goal is to use blockchain technology to streamline capital markets workflows through smart contracts, ledger and tokenization technologies. Marketnode partnered with Singapore-based fintech firm RootAnt Global and United Kingdom-based blockchain platform SETL to focus on developing fixed income and multi-asset end-to-end infrastructure.
Grab and Singapore Telecommunications have each acquired a 16.3% stake in PT Bank Fama International in order to pursue digital banking opportunities in Indonesia. They both got a digital banking license in Singapore.
Cap and trade and renewable energy trading exchanges
As the COP26 conference approaches, efforts to create a green recovery from the COVID-19 pandemic are increasing around the world. Rising ocean levels as a result of global warming pose a threat to Singapore, as 30% of the landmass is less than five meters (16 feet) above sea level.
The Sunseap Group, a solar energy system developer in Singapore, plans to spend $2 billion to build the world’s largest floating solar farm in the Indonesian city of Batam. This will double the renewable energy capacity for Singapore. Temasek is partnering with DBS Bank, SGX and Standard Chartered to launch a blockchain-based exchange, Climate Impact X, that will trade carbon credits. SP Group, a utilities provider, already has a blockchain-based renewable energy trading exchange in the country.
The United Nations COP26 climate change goals include the use of emerging technology and carbon taxes to help reduce emissions. The United Nations climate change conference in November 2021 (COP26) will aim to use carbon taxes and other measures to reduce emissions from industry in an attempt to meet international goals.
Green cryptocurrency mining companies
The process of obtaining new tokens through cryptocurrency mining generally requires the use of powerful computers, which in turn demand a large amount of electricity to function properly. China was the world’s largest crypto miner, but shut down in May 2021 citing the instability of cryptocurrency values. The profitability of mining companies is tied to the price of cryptocurrencies, which is why the shutdown occurred.
There are several cryptocurrency mining companies based in Singapore that have mining operations in other countries. Bitdeer, Saitech, Sharemine AI, and BitFuFu are some of these companies. Bitdeer and Saitech are seeking to have their stocks publicly listed on Nasdaq. Saitech converts the waste energy from mining into usable energy for residential, agricultural, and industrial applications. Bitdeer and Sharemine use clean energy generated from hydroelectric and solar power to mine.
Shipping
A study done by the Nanyang Technological University in Singapore looked at the shipping industries of Singapore and China and found that by digitizing their shipping documents, they could potentially reduce more than 99% of the carbon emissions caused by paper documents.
Related: How will blockchain technology help fight climate change? Experts answer
The company said it was “exploring how digital technologies, such as blockchain and digital assets, can contribute to our sustainable development and decarbonisation goals,” PSA International is looking into using blockchain and digital assets to help them reach their goals for sustainable development and reducing carbon emissions. The company said that they are exploring how digital technologies like blockchain and digital assets can help them achieve these goals. The company trades on supply chain blockchain platforms TradeLens and GSBN, and is an indirect minority shareholder in Global eTrade Services, which offers the Open Trade Blockchain for documents. PSA has agreed to work with RHT Group of Companies on an environmental, social and governance project.
Startups
The Tribe Accelerator is a blockchain accelerator launched by Trive Ventures, a Singaporean venture capital firm. The goal of the accelerator is to increase and streamline blockchain adoption in Asia, beyond financial services applications. The first blockchain accelerator to be supported by the Singaporean government is backed by Enterprise Singapore. The ecosystem supporting this technology includes Temasek, MAS, Citibank, IBM, Intel, and BMW.
Tribe has helped more than 50 startups become successful, with a combined value of over $1 billion. In November 2021, Microsoft launched the Singapore GreenTech Challenge to promote progress in startups with the goal of implementing Singapore’s Green Plan.
Central bank digital currency
Out of 87 countries, Singapore is one of the many exploring a central bank digital currency. This was mentioned by the Atlantic Council.
The MAS has been working on developing CBDCs and exploring the possibility of creating multiple CBDCs to speed up, reduce the cost, and increase the transparency of cross-border payments. It has developed a prototype multi-currency wholesale settlement network in partnership with China to enable the issuance and distribution of various CBDCs on a common network.
Related: Asian CBDC projects: What are they doing now?
Nonfungible token
Singapore Art Week 2022, which ran from Jan. 14 through Jan. 23, hosted TZ APAC, which celebrated Asian digital artists in an industry-first nonfungible token (NFT) showcase at the S.E.A. Focus showcase.
The ArtScience Museum in Singapore has opened a new exhibition called “Radical Curiosity: In the Orbit of Buckminster Fuller.” This exhibition is designed to integrate art, science, culture, and technology. It is the first museum in Asia to do this on such a large scale.
Buckminster Fuller is known as the “grandfather of the future” because he predicted a technology similar to blockchain, which is the basis for cryptocurrency. In a video interview from 1967, Fuller states:
“I’ll have to talk about something which will be one of the very big, new realizations by 2000 AD, which will be a realistic scientific accounting system of what is wealth. […] Wealth is energy.”
Best Countries for Cryptocurrency in 2022
If you are an investor or looking to start a business in the cryptocurrency sector, you will want to locate yourself in a country that is friendly to cryptocurrencies. We used data from various sources to assess different aspects of each countries’ regulatory frameworks, including taxes, adoption rates, and other relevant information.
Here are the best countries for cryptocurrency:
- El Salvador
- Singapore
- Slovenia
- Portugal
- Switzerland
- Germany
- Malta
- Estonia
1. El Salvador
The country of El Salvador has become the first in the world to officially adopt Bitcoin as a legal tender. All businesses in the country must accept BTC as payment. Several other countries have been inspired by this to start accepting crypto as legal tender, but it has its limitations.
The country of El Salvador is looking to improve its digital economy by bringing in businesses and investors that deal in cryptocurrency. Foreign investors do not have to pay any taxes on their profits from investing in cryptocurrency. If you want to avoid paying taxes on cryptocurrency, then El Salvador might be the ideal place for you to live.
The country’s leader, President Nayib Bukele, is pro-crypto and wants to help the small Central American country move forward in this sector. This means that approximately 60% of the population has adopted BTC as legal tender.
2. Singapore
Singapore is a highly developed economy in Asia and is a popular destination for cryptocurrency investors from all over the world. Southeast Asia is a great place to start a certified crypto business not only because it is a global fintech hub, but also because it is open to cryptocurrency.
This means that any profits gained from trading cryptocurrencies are not subject to capital gains tax in Singapore. This means that cryptocurrency transactions are not taxed in the country. If you earn income in cryptocurrency, you still have to pay income tax.
Singapore’s central bank has a positive outlook on crypto. Blockchain technology should be closely monitored to prevent illegal activity, but innovation should be encouraged. This makes it an ideal location to create a company specializing in crypto or blockchain that is backed by regulatory agencies.
3. Slovenia
Since emerging onto the global stage, the small Central European country has been dubbed a crypto haven. This is because the country offers tax write-offs on cryptocurrency trading and no VAT on mining. Iceland is encouraging the transition to blockchain technology
Slovenia has a higher rate of blockchain startups succeeding than any other country, when looking at market capitalization of crypto and other blockchain projects per capita. This is good news for crypto companies and investors from all over the world as the government has made it easier for them to operate in the crypto space.
Slovenia’s capital, Ljubljana, is the most crypto-friendly city in Europe for 2022. The city has hundreds of vendors accepting crypto payments. Europe’s largest shopping, leisure, business, and innovation center that accepts crypto currency is found in Slovenia. The shopping center has 500+ stores accepting cryptocurrency payments.
If you want to mine crypto in this country, you’ll have to pay a significant 25% income tax, even though there’s no capital gains tax or mining VAT. There is still an argument to be made that Slovenia is the most attractive destination for crypto enthusiasts and investors in Europe.
4. Portugal
Some people might say that Portugal is the best place to avoid paying taxes on cryptocurrency right now. As long as you’re not a professional trader, the country has no capital gains tax on crypto trading. This exemption applies to both crypto-crypto and crypto-fiat trades.
Portugal’s lack of taxes on cryptocurrency and its progressive laws are attracting businesses and investors from all over the world. In addition to that, the country has also started a Golden Visa program where non-EU residents can get a residency permit and a Portuguese passport if they make a qualifying investment.
5. Switzerland
Switzerland is world-renowned for its low-tax, high-privacy banking system. Although the country has very relaxed regulations for crypto companies and investors, it has also stepped up in the world of crypto.
Switzerland falls somewhere in the middle when it comes to cryptocurrency tax rates. It’s not the most tax-free country on this list, but it’s still fairly friendly. Cryptocurrencies are seen as assets by the country, and Bitcoin is recognized as legal tender in some areas. If you want to try cloud mining, the Crypto Valley in Switzerland is a great place to start.
You only have to pay capital gains tax on crypto if you’re trading it professionally. However, crypto income through professional trading is taxed.
Zug, Switzerland is a small city with a high concentration of blockchain businesses and is known as Crypto Valley. Zug is home to many cryptocurrency companies, including the Ethereum Foundation, Cardano, Dfinity, Bancor, and Tezos. These companies are experiencing rapid growth.
6. Germany
Germany stands out for its unique approach toward cryptocurrencies. Germany views cryptos as private money and not as an asset like most other countries on this list.
If you’re looking to invest your money for the long term, Germany is the best country to do it in. This is because there is no long-term capital gains tax in Germany. If you hold cryptocurrency for more than a year, the capital gains tax on it is not applied. You will still be required to pay income tax and short-term capital gains tax.
This sentence is talking about how Berlin is a popular place for companies that work with blockchain technology and cryptocurrencies. Some examples of these companies are EOS, which creates a blockchain operating system, and IOTA, which is a cryptocurrency. One of the first cities to accept crypto payments was also very welcoming to new technology.
7. Malta
Malta has become popular in the crypto world for its openness to blockchain technology. Because of its progressive legislation, the country has been attractive to crypto companies, including Binance, one of the best exchanges.
Investors will not have to pay a long-term capital gains tax on their cryptocurrency holdings. Even though crypto investors do not have to pay capital gains tax, they may still have to pay crypto income tax depending on their tax bracket. The Maltese government has recently passed several bills that make the country an even more appealing destination for cryptocurrency businesses.
8. Estonia
Estonia wants to improve its economy by convincing technology companies from around the world to move there with its more relaxed rules and laws that protect privacy. There are only a few countries where crypto companies can operate with legal and regulated certainty. In addition, the country is also investigating the possibility of launching a national cryptocurrency called Estcoin.
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