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Crypto banks in Singapore
Enjoy faster, cheaper and more secure day-to-day financial transactions as blockchain in banking becomes a reality.
Thanks to Singapore’s ever-evolving crypto legislation, the country’s financial sector is able to tap into the immense potential of the blockchain and pave the way for its integration with the mainstream banking system.
In this guide, we will discuss the rise of crypto banking in Singapore, how they work and the benefits they could offer.
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What is crypto banking?
Crypto banking is where digital exchanges or fintech companies let you buy, sell, store and manage your cryptocurrency from a digital wallet. Crypto banking services are designed to be like traditional or online banks, sometimes removing the need for you to ever personally interact with cryptocurrency.
What you can do with your cryptocurrencies depends on the platform. Many offer the ability to make payments through crypto debit cards and earn higher returns than you’ll find at your local bank. Some allow your crypto to be used as collateral for loans. And all-in-one crypto platforms such as Blockfi allow you to buy, sell and earn crypto through products like crypto-backed loans, trading accounts, savings accounts and credit cards.
How to get started with crypto banking (2 ways)
You can get involved in crypto banking in two common, beginner-friendly ways:
- Earn products. These let you own cryptocurrency and using a crypto banking service to lend it out to other users, earning you a high return in interest.
- Deposit products. Depositing fiat currency (such as SGD and USD) into a crypto bank and permitting it to convert your fiat into crypto to lend out and pay you interest on your total balance.
Carefully read the fine print of the crypto exchange you’re interested in to make sure it offers the services you’re looking for. You may be required to lock your cryptocurrency for a specified period of time before you can begin using it, for instance, or even wait a period of time before you can withdraw it.
How is crypto regulated in Singapore?
The Monetary Authority of Singapore (MAS), Singapore’s central bank and financial regulator, offers a balanced regulatory and legal environment for cryptocurrencies. Following enhancements to the Payment Services Act in January 2021, any entity that facilitates the transmission, exchange or storage of digital payment tokens (DPT) will require a license.
MAS has also been experimenting with its own e-money DLT-based currency on the Ethereum chain known as ‘Project Ubin’, a collaborative project with the industry to explore inter-bank payments using blockchain technology.
With this progressive and crypto-friendly stance, the Singapore government provides room for the country’s blockchain ecosystem to grow while concurrently monitoring any risks associated with crypto activities, such as money laundering and terrorist financing.
As of 2021, there are more than 230 blockchain native organizations based in Singapore.
5 benefits of crypto banking (and 5 risks)
If you own enough cryptocurrency to park it in an account, you may be able to take advantage of high returns and rewards:
- Sky-high yields. Companies like Crypto.com advertise interest rates as high as 14.5% interest. Platforms come with different requirements on the highest returns, often requiring you to invest in the platform’s native cryptocurrency to max out your interest.
- Easy access to your assets. Crypto banks are partnering with household names like Visa and Mastercard, making it easier for you to spend — and earn rewards on — your crypto.
- Returns in stablecoin. Many crypto banks offer products that can help you mitigate crypto volatility by investing in stablecoins — coins pegged to a “stable” fiat currency like USD. Earning interest on stablecoins may shield you from market volatility, as these types of cryptocurrencies are designed to maintain a value equal to the US dollar.
- Access low-interest financing. By offering up your crypto as collateral, you can access loans at lower rates than a traditional bank’s, often without a credit check or ID — and without having to sell your crypto.
- Minimal financial checks. For now, crypto banking offers an opportunity for the marginally banked and unbanked to access financing based only on the value of their crypto holdings and not their banking and financial history.
Cryptocurrency is a speculative investment, and today’s crypto banks lack protections and safeguards you may be used to:
- Offers little to no reserves. Crypto banks can offer high APYs because they don’t have to keep reserves traditional banks typically need to cover the cost of loan defaults. This enables them to generate a higher ROI — but also results in less protection if several high-stake loans fail.
- No government protection. Unlike traditional banking, there is no protection from government organisations such as the Monetary Authority of Singapore (MAS). If a crypto bank goes bust or gets hacked, your cryptocurrency holdings may be lost.
- You might need to give up control. A draw of cryptocurrency is that it’s controlled by whoever holds the private keys to it. Yet some crypto banks and wallets are custodial accounts that require you to give up and trust them with your keys.
- Rates fluctuate with the market. While rates for crypto savings accounts can be high, the value of your earnings can fluctuate with the market. Sharp market movements can leave you unable to react to those changing market conditions.
- Complicated tax reporting. Crypto users are responsible for tracking all crypto transactions, including trades, exchanges, donations and payments for goods and services with cryptocurrency. Failure to understand how could result in an audit or a crypto tax fraud investigation.
How crypto banks protect your money
Crypto banks understand the risks associated with their services, and top companies have developed protections to mitigate those risks for consumers.
Crypto banks often allow you to choose between hot or cold storage of your assets. Hot storage means that your crypto is stored online, where it’s easy for you and the platform to access. Harder to access is cold storage, where your crypto is stored offline, offering deeper protection against hacking and breaches.
Some crypto banks provide safeguards through pooled insurance and partnerships with third parties. For example, Nexo partners with both BitGo and Ledger on a $375 million insurance policy through Lloyd’s of London and Arch and Mars that covers a custodian’s assets in the event of a security breach or employee theft.
Binance and other top platforms support “bug bounty” programs, which invite the help of ethical hackers and cybersecurity experts to intentionally breach security protections and expose vulnerabilities — helping to strengthen protocols and stay a step ahead of bad guys trying to gain access to your virtual assets.
What crypto banks are there in Singapore?
In December 2020, Singapore-based DBS — the largest bank in Southeast Asia — announced the launch of its own crypto trading platform. Known as the DBS Digital Exchange, institutional and accredited investors will be able to tap into a fully integrated tokenisation, trading and custody ecosystem for digital assets. At the moment, the platform facilitates spot trading between four fiat currencies (SGD, USD, HKD, JPY), and four major cryptocurrencies, namely Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH) and Ripple (XRP).
With this move, we can expect more traditional banks and fintechs in Singapore to adopt blockchain technology and redesigned their financial services in the coming years.
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