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Guide to crypto banks in Singapore

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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 paves 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.

What is a crypto bank?

Crypto banks are financial institutions that allow you to deposit crypto assets and use them to make everyday payments. It’s the same as using your bank account, except instead of money you are dealing with cryptocurrencies. Depending on the range of services offered, these banks may also allow crypto lending, borrowing and investing in a wider range of instruments and markets.

Regulatory regime for crypto assets 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.

How do crypto banks work?

Crypto banks offer a way for customers to hold their digital assets and complete crypto banking processes such as depositing, saving, transferring, and more. So instead of simply storing cryptocurrencies in hot or cold wallets, you can use crypto more widely in everyday transactions.

To allow you to hold crypto in a bank account, crypto banks supplement their banking infrastructure with blockchain technology so cryptocurrencies can be used to facilitate transactions of all kinds, exchanged for goods or services and easily flow back into the market.

What are the benefits of crypto banks?

Crypto banking customers can look forward to a number of benefits, including:

  • Faster settlements. With a decentralised ledger (Bitcoin, Ethereum etc.), blockchain technology may facilitate and process faster payments at lower fees.
  • Lower fees. Based on a report from Santander InnoVentures, blockchain technology could reduce the infrastructure costs of banks by between US$15 to US$20 billion a year by 2022. Banks could then pass on these cost savings to customers with lower fees.
  • Better security. Smart contracts and the decentralised nature of blockchain eliminates any possibilities of fraud, allowing customers to benefit from transparent and more secure transactions.
  • Immutable and transparent. Investments, mortgages and other money-lending operations can be settled automatically once certain conditions are met (for example, once the bank uploads the required proper documentation). This streamlines routine tasks and could lead to significant savings, in both time and money.

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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