Singapore has built upon its strengths as a global financial centre to become a leading global blockchain hub. It is home to a healthy blockchain ecosystem, comprising numerous players at the forefront of trends in areas such as asset tokenisation, cryptocurrency trading and custody, supply chain, insurance, digital identity and mobility.
This enviable position has not come about by accident. In response to the increasing relevance of blockchain technology, Singapore has fostered a balanced legal and regulatory regime for the blockchain space that seeks to encourage innovation while protecting participants, investors and the general public. The Monetary Authority of Singapore (the “MAS”) provides clarity and guidance on the application of securities and commodities laws to digital assets, thereby encouraging new investments in financial technologies.
Ownership
The manner of determining ownership of digital assets under Singapore law has not been conclusively determined at the time of writing as the exact legal nature of digital assets remains unclear. Despite this, the High Court in Cheong Jun Yoong v Three Arrows Capital Ltd and others [2024] SGHC 21 (the “Three Arrows Case”) stated that it cannot be seriously disputed that crypto-assets constitute property. However, the concept of “ownership” vis-à-vis a digital asset under Singapore law was not challenged in the case.
Nevertheless, following the approach of the Singapore Court of Appeal in Quoine Pte Ltd v B2C2 Ltd [2020] SGCA (I) 02) (the “Quoine case”) and the High Court in the Three Arrows Case, it is anticipated that ownership of digital assets will be determined by analogy to other assets. A person who has acquired knowledge and control of a private key through lawful means will therefore generally be treated as the owner of that digital asset, in the same way that a person in lawful possession of a tangible asset is presumed to be the owner.
Categorisation
Fungible digital assets in Singapore can be broadly characterised as follows.
- Security tokens. These are digital assets which carry security features. They are typically shares, debentures and bonds and provide opportunities to generate income as well as potential legal liabilities for the issuer.
- Asset-backed tokens. These are digital assets which are backed with assets, such as gold, securities, real estate, cash or diamonds.
- Payment tokens. These are digital assets used for transactions, exchange, assets or value storage as well as accounting limits.
- Utility tokens. These are digital assets for supporting services or functionalities on blockchain-based platforms.
- Governance tokens. These are digital assets which confer the right to vote on decisions and the future trajectory of the projects on holders.
- Hybrid tokens. These are digital assets sharing two or more different characteristics of the above tokens to varying degrees.
Use of Digital Assets in Payment
Singapore permits the use of cryptocurrencies as a means of payment. There have been instances of M&A transactions and equity investments where the purchase consideration was settled in digital assets as well as secured financing transactions with security packages that included digital assets. There are no notable limitations on the use of cryptocurrencies for payment, after recent GST reform.
Tax
Taxation matters in relation to use of blockchain or cryptocurrencies are covered under existing tax legislation in Singapore, principally the Income Tax Act and the Goods and Services Tax Act (the “GST Act”). The Inland Revenue Authority of Singapore (the “IRAS”) has also released specific e-tax guides outlining how the legislation applies to blockchain and cryptocurrency matters.
Revenue for Goods or Services Using Cryptocurrency
Businesses that accept cryptocurrency as consideration for goods or services are subject to taxes on their income as set out in the Income Tax Act. These transactions will be considered as barter trade and the relevant revenue will be based on the value of the goods or services provided. Taxation will be based on net profits (after deducting allowable expenses under the Income Tax Act). The general tax rate for businesses currently stands at 17% of taxable income.
Investing and Trading in Cryptocurrency
Individuals or businesses that buy and sell cryptocurrencies as part of their business will be charged income tax on profits derived from trading in cryptocurrency. Profits derived by individuals or businesses which mine and trade cryptocurrency in exchange for money are also subject to income tax, as these will be considered revenue.
However, individuals or businesses that invest in cryptocurrency for long-term investment purposes may be exempt from income tax on the disposal of these cryptocurrencies, as these will be considered capital gains rather than revenue. As there are no capital gains taxes in Singapore, these gains are not subject to tax.
GST on the Sale of Cryptocurrency
Singapore has a value-added tax regime under the GST Act, whereby GST is levied on the supply of goods and services in Singapore and the import of goods into Singapore. GST is an indirect tax applied on the sale price of goods and services provided by GST-registered business entities in Singapore. The current rate of GST is 9%.
The supply of cryptocurrency that falls within the definition of “DPTs” under the GST Act is no longer subject to GST. Specifically, the use of cryptocurrency as payment for goods or services will no longer be construed as a supply of a service and the user therefore need not account for GST on their use. Furthermore, a supply of DPTs in exchange for fiat currency or other DPTs and the provision of any loan, advance or credit of DPTs will be exempt from GST.
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