Singapore is a highly prosperous island state that serves as a business hub for South East Asia. It has a highly developed and successful free-market economy. The country provides one of the world’s most business-friendly regulatory environment. As a result, businesses in regulated industries have long flocked to Singapore, especially in the financial, cryptocurrency and payments sectors.
Many US or European crypto exchanges and brokers have been looking at expanding into Asia in recent months. Considering the vitality of the crypto ecosystem in Asia, this trend is likely to continue.
Singapore is widely respected and recognized as a major onshore financial services hub. The country has a low tax regime on domestic and offshore profits and a reasonable approach to regulatory fees. As a global financial trading center with a very stable government, the regulatory license issued by the Monetary Authority of Singapore has a global cache.
Singapore is an ideal jurisdiction to obtain a digital asset license. The Monetary Authority of Singapore oversees and enforces its payment institution licenses and has had great success in attracting leading cryptocurrency exchanges and initial coin offerings. Therefore, this jurisdiction is highly regarded by blockchain professionals around the world.
In January 2020, the Payment Services Act (PSA) went into effect to regulate traditional as well as cryptocurrency payments and exchanges. The PSA provides a framework to obtain a license to operate a cryptocurrency business in Singapore, and outlines money laundering requirements to be met by cryptocurrency operators.
Advantages of Singapore Crypto License
Bitcoin alone has an average daily trading volume of more than $20 billion. The streamlined and cost-effective process of obtaining a Singapore cryptocurrency license can get you into this lucrative market in as little as six months. As the use of cryptocurrencies has increased globally, it is estimated that cryptocurrency exchanges made more than $1 billion in profits last year alone. As major economies such as the US and EU have increasingly complex cryptocurrency regulations, Singapore offers a cost-effective and risk-free alternative to starting a licensed cryptocurrency exchange or broker-dealer.
Regulation of a Crypto Exchange
A crypto exchange that operates in Singapore and offers the trading of cryptocurrencies (i.e. Bitcoin and Ethereum) shall be regulated by MAS under the Payment Services Act (“PSA”).
Exchanges that only trade cryptocurrencies can only be regulated under the PSA for Anti-Money and Countering Financing of Terrorism (“AML/CFT”) purposes.
A person carrying on a business of providing any service of dealing in digital payment tokens or any service of facilitating the exchange of digital payment tokens must be licensed and regulated under the PSA.
Licensing Requirements
A crypto exchange must apply for a Standard/Major Payment Institution licenses under Payment Services Act.
Subject to meeting licensing requirements, including the fit and proper criteria, the MAS may grant a license.
Upon becoming licensed under the PSA, the exchange will be licensed payment service provider and must comply with the Payment Service Act and its subsidiary regulations and regulatory instruments as issued by the MAS from time to time.
A regulated crypto exchange can offer services to both retail investors and qualified investors depending on their type of license.
Crypto exchanges regulated as payment service providers can offer cryptocurrencies (i.e. Bitcoin and Ethereum) and other digital payment tokens.
Corporate Service and Visa Considerations
Company incorporation
The entire company incorporation process normally takes less than one week.
Must have at least one local director who is “ordinarily resident” in Singapore (i.e. citizen, permanent resident).
Subject to compliance with prevailing laws and regulations on employment of foreign manpower, an employment pass holder with a local residential address may be accepted as a director who is ordinarily resident in Singapore.
Every Company must have a registered office address in Singapore (which cannot be a PO Box but a physical location).
Generally, service providers that help incorporate and set-up your company also provide registered office services. Registered office can also be a coworking space.
Visa
A valid work pass or permit (e.g. employment pass ) is required to take up employment. The employment pass can be linked to the newly incorporated company.
Pension and insurance requirements
• Every employer will be required to make contributions to the Central Provident Fund Board for employees that are Singapore citizens and Permanent Residents.
• The CPF contribution rate for employees is dependent upon citizenship status, age group and total wages.
Annual filing requirements
• Filing Annual Return with ACRA
• Holding Annual General Meeting
• Preparing audited financial statements unless exempted.
• Filing annual tax return with (IRAS)
Tax Considerations
Applicable tax rate (Commercial + Personal)
The prevailing corporate income tax rate for companies is 17% on its chargeable income. Partial tax exemption is available for up to S$200,000 of chargeable income.
Individuals are taxed at progressive rates on their net chargeable income (i.e. assessable income after deductions and allowances) starting at 2% to 22%.
There are no capital gains tax in Singapore.
Applicable GST
Services to facilitate the exchange of cryptos is generally subject to GST at the standard rate of 7% if the services are performed for Singapore clients. The trading of cryptos as a principal is exempt from GST if the cryptos fall within the definition of “Digital Payment Tokens”.
Tax guidance for crypto assets
The Inland Revenue Authority of Singapore released a new e-tax guide in April 2020 where it recognizes 3 types of digital tokens (payment, security and utility tokens) and the income tax treatment will depend on their nature and use.
How crypto payment tokens (e.g. Bitcoin) are classified
For GST purposes, digital payment token has been defined to include digital tokens that are intended to be a medium of exchange accepted by the public, amongst other characteristics. Examples of such tokens are Bitcoin, Ether, Litecoin, Dash, Monero, Ripple and Zcash.
Crypto lending taxable
There are no specific exemption for crypto-lending, general tax principles apply.
Singapore Cryptocurrency License at a Glance
License | Class F Payment Institution |
Time to License | 1 to 2 Months |
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General
Licence | Payment Institution License |
Regulator | Monetary Authority of Singapore |
Time to Approval | Approximately four (4) to six (6) weeks |
Corporate Structure
Form | Singapore Private Company Limited by Shares |
Currency | USD |
Min. Paid In Capital | $1.00 |
Corporate Tax Rate | 0% on Offshore Profits |
Officers & Directors
Min. Number | Two (2) |
Local Directors | Yes |
Publicly Accessible Records | Yes |
Stockholders
Min. Number | One (1) |
Public Accessible Records | No |
Location of Meetings | Global |
Time the Application Process Takes
A “traditional” regulatory application (not for digital assets) for each of the various licenses can easily take at least 4-6 months depends on the complexities and quality of submission.
This indicative timeline may vary depending on a broad range of factors from the readiness of the applicant to the length of discussions with the regulators.
Contact the Singapore Cryptocurrency License Professionals
At Bestar, our purpose is to solve important problems. We are a network of firms in 3 countries with more than 50 people who are committed to delivering quality in assurance, advisory and tax services.
We offer a “one stop shop” solution for our crypto clients across our multiple lines of service.
Scope of Work
1. Form Singapore-incorporated company
2. Preparation and drafting of shareholder and officer agreements
3. Preparation and drafting of narrative business plan
4. Preparation and drafting of current financial statements.
5. Preparation and drafting of 3-year financial projections
6. Preparation and submission of application with MAS
7. Preparation and drafting of address to inquiries from MAS
8. Identification and engagement of internal auditor and resident director
9. Facilitate opening of bank accounts
10. Preparation and drafting of required employee compliance policy
11. Preparation and drafting of AML/CFT Policies & Procedures
12. Preparation and drafting of client agreements and disclosures
Contact the offshore banking license experts at Bestar to begin the process of obtaining your Singapore Cryptocurrency license today. Our knowledgeable and skilled professionals are pleased to answer any of your questions.
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