Crypto Regulations in Singapore
Singapore is recognized as an early adopter and innovator in cryptocurrency regulation. Back in 2019, well ahead of the MiCA regulation, the Monetary Authority of Singapore (MAS) established a set of rules for crypto companies, bringing clarity and legitimacy to digital finance.
Cryptocurrency Laws and Regulations in Singapore
MAS, as the central financial market regulator, offers two main types of licenses for local market players:
- Financial Service Provider (FSP) License: Essential for companies dealing with cryptocurrency exchange, storage, and management.
- Digital Asset Service Provider (DASP) License: Necessary for businesses providing other crypto-related services, such as investment advice, mining, or managing ICOs.
To be eligible for an FSP or DASP license, companies must:
- Be registered legally in Singapore.
- Have a Singaporean citizen as a director.
- Show expertise in financial management.
- Appoint a chairman, CEO, and board members with clean legal records.
- Inject a minimum of 100,000 Singapore dollars (around $75,000) as charter capital.
- Employ a local citizen as an AML manager.
- Implement an AML/CFT policy.
Moreover, all crypto companies in Singapore must comply with investor protection rules (MAS Notice 1510).
Obtaining a crypto license in Singapore can take several months, but the process is generally straightforward. MAS enforces strict compliance with investor protection and anti-money laundering laws, while minor violations in other aspects may be overlooked.
Crypto Taxes in Singapore
Singapore is notably the first country to integrate digital currencies into its taxation system. In 2019, the Singaporean Ministry of Finance announced the inclusion of virtual currencies in the consumption tax to regulate the digital currency market more effectively.
In Singapore, cryptocurrencies are classified as digital assets and are divided into three categories:
Cryptocurrency-related business activities are taxed at a rate of up to 17%. Although exchanges are not mandated to report transaction details to tax authorities, traders are expected to self-declare their crypto trading income and file taxes by April 15th of each year.
- Payment Tokens: Used for buying goods and services.
- Utility Tokens: Linked to assets with practical applications, like virtual items in blockchain games.
- Security Tokens: Convertible into traditional financial securities like stocks or bonds.
Cryptocurrency-related business activities are taxed at a rate of up to 17%. Although exchanges are not mandated to report transaction details to tax authorities, traders are expected to self-declare their crypto trading income and file taxes by April 15th of each year.
Expatriates in Singapore can benefit from a range of tax deductions and benefits. They are required to pay taxes only if they reside in the country for more than 183 days per year. Otherwise, they are considered non-residents and exempt from local taxes. This has led to many retail crypto platform clients not reporting their transactions in annual tax returns.
Legal entities also have certain tax loopholes.
Legal entities also have certain tax loopholes.
Local companies trading cryptocurrencies as part of their business activities are taxed on crypto profits as regular income. However, companies holding cryptocurrencies for long-term investment purposes are exempt from taxes since Singapore does not impose a Capital Gains Tax (CGT). Therefore, profits from cryptocurrency sales are tax-free if held for 30 months from the date of purchase.
Overall, Singapore is recognized as one of the most accommodating Asian jurisdictions for cryptocurrency.
